2025 is here and there are trends related to talent that deserve watching. Much of what happens this year will be defined by two factors – demographics, and the elevation of Donald Trump to the White House. The first cannot be reversed, at least in the foreseeable future. The impact of the second will likely last well past The Trump Administration’s second term, as policies enacted will remain in effect possibly for a decade or more.
The Labor Market will Tighten
A sustained contraction of the supply of labor coupled with a likely increase in demand will mean a tightening labor market. The Bureau of Labor Statistics (BLS) projects that the civilian labor force will grow at an annual rate of just 0.4% over the next decade. This growth is slower than in previous decades, primarily due to an aging population and declining labor force participation rates. In 2025 the labor force participation rate is projected to decline as well, from 62.6% in 2023 to 61.2% by 2033, reflecting the increasing number of retirees and a smaller proportion of working-age individuals.
Immigrant labor will be severely curtailed at all levels. Migrant labor, which includes the largest share of undocumented workers, may actually suffer the least in the near term, despite the threat of mass deportations. Legal hurdles and the logistics of trying to find and deport millions of people are just some of the challenges that would constrain any such effort. Further limitations will arise in the form of opposition from lawmakers in states with sizable farm economies, which would collapse without migrant labor. The first Trump Administration had actually increased the number of work visas available to temporary labor in response to demand from the farm states, and may do the same again.
It’s another matter with skilled labor. Last June, Mr. Trump suggested that students graduating from American universities should be eligible for green cards, but during his last time in office, his administration restricted immigration even from high-skilled workers. During the last Trump Administration administrative procedures associated with immigrant work visas were much more rigorously enforced than before. Denial rates for key work visas, such as the H1B and the L1 rose. Average wait times increased by 46%, as requests for evidence (where applicants are required to provide lengthy documentation to prove they qualify) and interviews became more common. Employers should expect increased scrutiny for visa renewals and fewer waivers. The administration may also consider pausing acceptance of applications for new visas in categories where there’s a large backlog.
Increased Demand
Economic growth is likely to accelerate substantially in 2025, boosting the demand for labor. Analysts expect the economy to grow by 2.7% (currently 1.9%), as a result of tax cuts, interest rate adjustments and deregulation. The industries that will see the most benefits include:
Increased Labor Costs
The inevitable consequence of decreased supply and increased demand for labor will be a jump in labor costs. Analysts are already projecting 6%-8% increases by the end of 2025. Expectations that labor demand will be moderated by increased deployment of AI are premature at best; a pipe-dream at worst. There’s little to suggest that AI will have enough of an impact that it will reduce the need for jobs in any significant number. The only hope is that there’ll be enough of a productivity boost from AI that it’ll produce higher margins on goods being manufactured and services being delivered. But any such impact, assuming it happens at all, will be uneven and to speculate about it is to enter the realm of fantasy.
Recruiters Will Not Become An Endangered Species
For now, recruiters look safe from being impacted by AI. Projections of their demise have been around a long time, long before AI. Job Boards were supposed to make recruiting obsolete as they would serve as a clearing house for candidates and jobs. But much as automated trading on NASDAQ and the NYSE did not make traders extinct, neither did job boards do the same for recruiters. Then social media was expected to make sourcing ubiquitous and eliminate the need for much of what recruiters do. Then block chains were going to do something (no one ever knew what) but it only made for a lot of dull presentations, boring blog posts, and mindless techno-blather masquerading as prognostications of a recruiter-free future. I expect AI will be much the same.
