Uncertain Economy Adds to Recruitment Challenges

Recruiters say that hiring difficulty is dropping — though still elevated — and retention is improving, but experts believe that’s because the labor market is experiencing a period of high uncertainty and potential job hoppers are staying put.      

SHRM surveyed over 2,000 HR professionals earlier this year, and 69% reported difficulty recruiting for their full-time positions over the last 12 months. That’s down from 77% last year and steeply down from a high of 91% in 2022. 

“It’s not surprising that recruiting is still difficult and retention is improving,” said Jim Link, SHRM-SCP, chief human resources officer at SHRM. “Organizations are responding to what is happening in the greater economic environment. It is still hard to find key skilled talent. Those people are parking themselves in their current jobs. But the real story is: Are they actually engaged? I think the challenge for HR is to ensure that the people they are retaining are engaged, productive, and learning.” 

Business executives are nervous about the economy right now, agreed Tim Sackett, SHRM-SCP, industry veteran and author of The Talent Fix Volume 2 (SHRM, 2024). “Companies are holding onto their money and not really spending. Some companies over-hired in recent years and are thinking instead of cutting the fat and tightening up hiring,” he said. 

Adam Stafford, CEO of recruitment marketing and analytics platform Recruitics, said that the barrage of policy changes coming out of the new Trump administration is also causing hesitancy among employers.   

“Parts of the labor market will be significantly impacted by immigration restrictions and heightened immigration enforcement, driving up competition for lower-skilled labor and increasing pressure on wages later this year,” he said. “The impact from tariffs is uncertain but will affect some industries more than others. On the other hand, the federal workforce cuts can be an opportunity for the private sector to scoop up quality talent in certain fields, like cleared professionals, data science, and health care.” 

Meanwhile, the pressure to become more productive continues to mount, Stafford said. “The years since the post-pandemic recovery and rightsizing has shown that even companies conducting layoffs are also investing in new talent that is directly related to what they see as being strategic for the future of their business. While recruiting teams have been constrained, the volume of requisitions and applicants to handle has been rising.”  

Recruitment Challenges

Among those experiencing difficulties in recruiting, top challenges include a low number of applicants (51%), competition from other employers (50%), and candidates ghosting (41%). Employers also cite candidates not having the right work experience or skills and the inability to offer flexible work or more competitive compensation as major hurdles to recruitment. 

“When I talk to senior TA [talent acquisition] executives, it’s still ‘We can’t find enough of the right talent for us,’ ” Sackett said. “It’s not that people aren’t out there. Applicant tracking data shows that the amount of applies per position has increased. There are a lot more resumes to plow through, but if you’re in manufacturing, or the skilled trades, or engineering, certain positions are still critically hard to fill. That’ll continue to be the case with low unemployment.” 

Jamie Kohn, senior research director at Gartner, said that an ongoing challenge is the need for recruiting to be a lot more efficient. “Leaders have been pushing hard for the efficiency of the recruiting function, but cost pressures are going to continue, particularly if we go into an economic downturn.”  

Candidates have been declining offers and remaining uncommitted to new roles, even as the labor market cools, Kohn said. “Candidates are nervous right now. Nobody wants to be last in and first out at a new organization. People are only jumping if they feel the offer is really compelling. And it’s a lot harder for companies to make high salary offers right now, like we saw a couple of years ago.” 

Even amidst the uncertainty, employers should be thinking about the next hiring rebound and not be caught unawares. 

“There will be a return to normalcy,” said Jake Zabkowicz, global CEO at Hudson RPO. “Attrition will normalize, and TA needs to continue to innovate. Don’t get caught on your heels. Start thinking about what your hiring volumes will be.” 

He recommended that employers focus on internal mobility — which involves identifying internal talent based on their skill sets and matching them to open roles — and develop returnship or boomerang programs targeting previous employees who would make great rehires. 

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Skills Evolution  

SHRM found that over 25% of organizations have positions they’re hiring for that require new skills and that it’s been somewhat (67%) or very (12%) difficult to find qualified candidates for open positions requiring these skills. The skills reported to be in the highest demand are basic skills (58%), followed by more complex skills (36%), social skills (36%), and technical skills (28%).  

“Skills are evolving fast,” Kohn said. “We are seeing a major shift in the skills that organizations think they are going to need. AI is creating a shift in how we think about what skills are critical for a job versus where you just need to be conversant in a skill. At the same time, some things are not changing. We need people who are strong problem-solvers, who can collaborate, who can learn new skills.”  

These types of skills, often referred to as soft skills, are the power skills that get work done behind the scenes, Link explained.   

“The ability to communicate, negotiate, persuade, influence, collaborate, to have an innovative mindset, to be entrepreneurial,” he said. “These skills are much harder to assess, and they are harder to replicate through technology. HR will need to lead an equal measure of upskilling on both technical and power skills.” 

Kohn recommended that employers focus on a narrower set of critical roles or capabilities tied to the business road map instead of trying to map all the skills for all of the roles in the organization. “The minute you finish that, it’s already out of date,” she said. “If you look at the business strategy and a smaller number of critical roles, it becomes a lot easier.”     

AI Adoption

Forty-three percent of respondents to the SHRM survey said that they use AI to support HR work, with the majority using the technology for recruiting. More specifically, they use AI tools to generate job descriptions, review or screen applicant resumes, and automate candidate searches. Nearly 90% of those who do use an AI tool say it saves them time and/or increases their efficiency.   

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“AI is here to stay,” Zabkowicz said. “There’s a lot of great technology out there that is improving the candidate experience and the hiring team’s experience. Many companies are still trying to figure out where to embed AI in their TA ecosystem. Each organization needs to find a tool that really sticks and shows quantifiable results.”  

AI is making the biggest difference right now in the early hiring funnel process, Stafford said. “AI can take what is a pretty antiquated process of humans screening and assessing applicants and scheduling interviews and make a big impact in helping evaluate and prioritize talent early in the hiring process.” 

He added that customers are reporting reductions in time-to-interview and improvements in candidate quality and experience. “We’re also seeing our clients amplify the impact of their ad spend and reduce the need to advertise by implementing AI-powered solutions at that point of initial interaction with candidates.” 

Kohn said that AI-enabled sourcing has the potential to overcome the challenge of searching for talent with niche skills. “Candidates are not always good at articulating the skills they have, and recruiters aren’t always good at understanding where a candidate may have high-value adjacent skills,” she said. “AI can infer the skills a candidate might have and match them up to multiple roles in the organization.” 

Screening is another area where AI has made a lot of early progress. “The standard now is a recruiter looks at a fraction of the applications or resumes that come in, and screens another fraction of those, and then sends a few to a hiring manager,” Sackett said. “Most candidates by far never even get a look. An AI screener can include 100% of applicants in the initial screen. When you talk about inclusivity or hiring more effectively from a larger pool of talent, that’s your solution.” 

Work Flex 

A significant gap exists between employee expectations and employer practices regarding work flexibility, with recruiters feeling the pain when they can’t offer hybrid or remote work options. 

Offering flexible work is the most effective recruitment tactic, according to the SHRM survey, but one of the least used. 

“Return-to-office [RTO] is a topic of conversation everywhere,” Zabkowicz said. “One argument is that if everyone is back in the office, you can see productivity and hold people more accountable. But the COVID years taught us that there are many roles for which you can have a flexible working environment and still maintain productivity.” 

But certainly, the access to talent would be unconstrained if recruiters offered flexible work, he said. 

“RTO policies are often made without the input of talent acquisition,” Kohn said. “TA leaders know they can attract better talent and have more sourcing options if they are able to offer remote work. Candidates still prioritize flexibility, but they realize there is less access to it than before. Flexibility when you work tends to be more important than flexibility in where you work,” she said.   

Stafford sees the RTO discussion break down by job level. “The companies that invest heavily in hiring and training entry-level talent are more likely to require in-office work. The benefits of being in the office are not as strong for more senior-level employees. The result is that those just entering the workforce will have a harder time finding fully remote work, and those senior-level professionals, especially in high-demand fields, will continue to find companies making accommodations for remote work because it has proven to be effective.”