There is some difference of opinion as to who it was that actually began this holiday. Some say it was a gentleman by the name of Matthew Macguire from New York in 1882 and others attribute the idea to a Peter McGuire, then American Federation of Labor employee, also in 1882.
The celebrations began on the state level. Oregon was the first to officially acknowledge it as a state holiday on Feb 21st, 1887. About 30 more states were to follow in Oregon's footsteps. Shortly thereafter, Congress was willing to create legislation that made it a legal holiday, nation wide.
On June 28th, 1894, the bill to make Labor Day a national holiday, was passed.