In 1882, Matthew Maguire, a machinist, first proposed the holiday while serving as secretary of the CLU (Central Labor Union) of New York. Others argue that it was first proposed by Peter J. McGuire of the American Federation of Labor in May 1882, after witnessing the annual labour festival held in Toronto, Canada. Oregon was the first state to make it a holiday on February 21, 1887. By the time it became a federal holiday in 1894, thirty states officially celebrated Labor Day.
The First Labor Day
The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union. The Central Labor Union held its second Labor Day holiday just a year later, on September 5, 1883.
In 1884 the first Monday in September was selected as the holiday, as originally proposed, and the Central Labor Union urged similar organizations in other cities to follow the example of New York and celebrate a "workingmen's holiday" on that date. The idea spread with the growth of labor organizations, and in 1885 Labor Day was celebrated in many industrial centers of the country.
-from "The History of Labor Day" on the U.S. Department of Labor website