Current Conditions: Employment Condition Optimism Declines
In Q2 2025, 35% of HR executives rated current employment conditions as good or excellent (33% good; 2% excellent). Meanwhile, more than half of HR executives (52%) rated employment conditions as fair, with only 13% perceiving conditions as poor or very poor (2% very poor; 11% poor). Â
After two quarters of stability, evaluations of employment conditions have shifted. The proportion of HR executives rating employment conditions as excellent or good has declined by 9 percentage points, while ratings of fair have increased by 4 percentage points, and poor or very poor ratings have risen by 6 percentage points. Despite these shifts, these results suggest a relatively stable employment landscape, with less pronounced changes compared to the economic outlook.
Employment Forecast: Expectations for the Next 6 Months
The U.S. labor market continued to trend upward following Q1, with total nonfarm employment seeing a 177,000-job increase in April. However, federal government employment declined. Although the unemployment rate for April remained unchanged at 4.2%, uncertainty around the effects of tariffs and large reductions in the federal workforce may be driving anxiety about future employment conditions.1
Despite a relatively stable assessment of current conditions, we see notable shifts in expectations for the next six-month period. A record 27% of HR executives now anticipate poor or very poor employment conditions, reflecting a 17-percentage-point increase from Q1 2025. Conversely, only 28% foresee good or excellent conditions, a notable decline. However, a plurality (46%) still predict fair conditions.
These expectations align with a more pessimistic outlook on future economic conditions, suggesting HR executives recognize their likely impact on future employment trends.
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Record Low Budget Growth Expectations Among HR Executives
While the overall labor market remained relatively stable in Q1 2025, the federal workforce cuts and possible tariff increases indicate labor market uncertainty.Â
HR executives’ assessments of the economic environment and forecasts for business performance align with record low expectations for increases in total rewards and recruiting budgets. In Q2 2025, only 31% of HR executives anticipate an increase in their total rewards budget, a 17-percentage-point drop from Q1 2024 and a 25-percentage-point decline from Q4 2024. Most expect their total rewards budget to remain unchanged, while 15% anticipate a decrease.
Similarly, only 17% of HR executives expect growth in their recruiting budget, a 10-percentage-point decline from the previous quarter. The majority (67%) foresee no changes, and 16% expect a decrease.
| Â | Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% |
|---|---|---|---|---|---|---|---|
| Total rewards budget | <1% | 6% | 25% | 54% | 9% | 4% | 2% |
| Recruiting budget | <1% | 4% | 13% | 67% | 10% | 3% | 2% |
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Takeaways/Implications
15%
of HR executives anticipate a decrease in total rewards budgets over the next six months.
16%
anticipate a decrease in recruiting budgets during the same period, just below the 17% expecting an increase.
Compensation Trends: Fewer Expect Salary and Wage Growth
Similar to budget projections, fewer HR executives anticipate increases in annual salaries and hourly wages over the next six months. In Q2 2025, 56% of HR executives anticipate a rise in annual salaries over the next six months — marking a 20-percentage-point decrease from Q1 2025. Similarly, 51% expect hourly wages to increase during the same period, reflecting a notable 19-percentage-point decrease from Q1. Of those projecting increases, the majority are predicting increases of less than 10%. Many HR executives are expecting no changes.
When it comes to hiring costs, less than half (45%) of HR executives expect an uptick in cost per hire, consistent with Q1 2025. Meanwhile, over half (51%) predict no change in hiring costs, again consistent with Q1 2025.
| Â | Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% |
|---|---|---|---|---|---|---|---|
| Annual salaries* | 0% | 2% | 53% | 41% | 2% | <1% | 1% |
| Hourly wages* | 0% | 3% | 48% | 48% | <1% | 0% | 1% |
| Cost per hire* | <1% | 10% | 34% | 51% | 4% | 0% | <1% |
* = New in Q2 2024
Slight Decline in eNPS Growth Expectations, Consistent with 2024 Trends
Nearly 1 in 3 (30%) HR executives anticipate an increase in their eNPS/employee engagement, marking a 5-percentage-point decrease compared to Q1 2025, but relatively consistent with 2024 ratings. Meanwhile, nearly half (46%) predict no change, a 2-percentage-point decrease from Q1 figures.
| Â | Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% |
|---|---|---|---|---|---|---|---|
| eNPS/Employee Engagement | <1% | 3% | 28% | 46% | 20% | 4% | 1% |
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More HR Executives Predict Decline in Revenue Per Employee
In Q2 2025, nearly 4 in 10 (37%) HR executives anticipate a rise in overall productivity — a 3-percentage-point decrease from Q4 2024 — while under half (45%) foresee no change. Slightly fewer HR executives expect revenue per employee to grow in the next six months (34%), reflecting a 9-percentage-point decrease from Q4, whereas 48% predict no change, consistent with Q1 2025. Notably, 19% expect a decrease in revenue per employee, an 8-percentage-point increase from Q1. Given the decline in expectations for revenue growth, this trend aligns with the broader sentiment.
| Â | Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% |
|---|---|---|---|---|---|---|---|
| Overall productivity | 0% | 7% | 30% | 45% | 14% | 3% | 1% |
| Revenue per employee** | 1% | 4% | 29% | 48% | 15% | 3% | 1% |
** = New in Q3 2024
Methodology
The CHRO Outlook survey is a research study conducted quarterly. The survey was fielded electronically using the SHRM Voice of Work Research Panel to U.S.-based HR executives and senior HR executives (VP+). Respondents represented organizations of all sizes and across industries.
| Quarter, Year | Sample Size (n) | Fielding Dates |
|---|---|---|
| Q4 2022 | n = 241 | 12/01/22 - 12/22/22 |
| Q1 2023 | n = 249 | 03/06/23 - 03/21/23 |
| Q2 2023 | n = 199 | 06/08/23 - 06/16/23 |
| Q3 2023 | n = 536 | 08/30/23 - 09/11/23 |
| Q4 2023 | n = 376 | 11/17/23 - 11/22/23 |
| Q1 2024 | n = 391 | 01/03/24 - 01/10/24 |
| Q2 2024 | n = 352 | 04/15/24 - 04/24/24 |
| Q3 2024 | n = 339 | 07/17/24 - 07/25/24 |
| Q4 2024 | n = 320 | 10/16/24 - 10/25/24 |
| Q1 2025 | n = 323 | 01/13/25 – 01/21/25 |
| Q2 2025 | n = 353 | 04/08/25 – 04/20/25 |
1. According to the Bureau of Labor Statistics’ jobs report for April 2025 (published on May 2, 2025), total nonfarm employment increased by 177,000 jobs in April.
Read the Q2 2025 series:
CHRO Employment Outlook | CHRO Economic Outlook | SHRM Hiring & Retention Difficulty Indexes