2025 continues to present a challenging job market with employers and employees bracing for what might come next. With companies battling the impacts, or possible impacts of tariffs. Either in place or with the potential of coming. Businesses are adopting a more conservative approach. Depending on the business, these measures might include cutting back on advertisements or slowing down hiring to evaluate the current landscape.
Budget Planning
As Q4 approaches swiftly, businesses must evaluate how to make the most of what remains of 2025 while making plans for 2026. A Budget Survey released in August from Payscale, Inc. found U.S. employers are taking a cautious approach in 2026. That includes businesses making plans for a 3.5% salary budget increase in 2026, down 0.1% from 2025.
The Budget Survey, which is in its tenth year, surveyed more than 1,500 of their clients and contacts. Those surveyed said the decline in pay increases is attributable to concerns about the current economy. This factor was mentioned by 66% of organizations and is a 17% increase from their Budget report from the previous year.
Labor Shortages
In this economic climate, fewer organizations are looking at labor shortages as a reason to bump salaries, and only one-third (34%) of respondents see it as a factor in 2025. This is down 19 percentage points from 2024, according to the report. Notably, the tech sector, typically an area where talent drives salaries, is seeing a 0.5% decrease for next year as compared to this year. This presents a potentially difficult scenario for employees of all demographic groups as day-to-day living costs continue to rise.
Future Impacts
Gen Z in particular faces a tight job market. Earlier this year, new graduates found themselves facing a high unemployment rate. It will be interesting to see how this new generation entering the workforce will combat these issues. Will this see students returning to college for an advanced degree or perhaps pushed in another direction such as pursuing work in the trades? Additionally, only time will tell if growing distrust in the value of higher education will create a lasting ripple effect across the work environment potentially for generations to come.
