Are You Ready for 2025’s Biggest Labor Challenges? Here’s How to Stay Ahead of Them

As we enter the second quarter of 2025, businesses across the U.S. are navigating an increasingly complex labor market. There are challenges around deportations and unauthorized workers, economic uncertainty with tariffs, unpopular return-to-work policies, and a shift toward skill-based hiring. Is your business prepared for these challenges? Let’s break down the most prevalent labor issues and how your business can rise above them.

Deporting Illegal Immigrants is a Top Priority for the White House

A prevailing issue in the United States right now is the government’s focus on illegal immigration and deportation. Department of Homeland Security (DHS) spokeswoman Trish McLaughlin says deportations have exceeded 117,000 in the first 70 days of this administration. Currently, undocumented workers make up about 6% of the workforce in the United Staes and they are most commonly found working in agriculture, construction, hospitality, manufacturing, and transportation. Of note:

Immigrants make up almost 20% of the U.S. workforce
Of the 31.7 million immigrant workers, 10.7 million are undocumented

What This Means for Your Business

At the beginning of 2025, the U.S. was already experiencing labor shortages in agriculture, construction, hospitality, manufacturing, and healthcare. These shortages, in part, are due to an aging workforce and declining national fertility rates. Without legal immigration, these labor shortages will only get worse.

According to the U.S. Chamber of Commerce, “America is facing a worker shortage crisis.” Labor force participation remains below pre-pandemic levels, and the effects are being felt across nearly every industry. In the piece titled, “Understand America’s Labor Shortage,” the Chamber of Commerce data shows that there are currently about 8 million job openings but only 6.8 million unemployed workers.

Hiring could be harder than ever during the current worker shortage. That means traditional recruitment methods and job-board postings may leave your roles unfilled. That’s where a staffing agency can help. Not only does an agency have the expertise to find the right candidates to fill your roles, but they also have databases with millions of candidates and might already have the right people for your jobs. This includes passive candidates who aren’t actively looking for a job but might be open to a compelling opportunity. Plus, a staffing firm takes the burden off your Human Resources Department so they can concentrate on your core business.

Compliance Pressures Are Mounting

With the workforce and hiring practices under increased scrutiny by the federal government, businesses face a greater risk of audits. In today’s environment, a single audit could put your business at risk.

There is a particular focus right now on unauthorized employees working in the United States. That’s where E-Verify comes in. It’s a web-based employment verification system that compares your new hire’s I-9 form to the Department of Homeland Security and Social Security Administration databases.

According to the Baker Institute on Public Policy, “Immigrants both documented and undocumented play a vital role in the U.S. economy as workers, consumers, and taxpayers.” Immigrants’ participation in the U.S. labor market increased from 14.8% in 2005 to 19.7% in 2025.

What This Means for Your Business

Not using E-Verify could cost you. If you’re caught with unauthorized employees, you could be fined thousands of dollars per unauthorized employee. Just a paperwork violation can cost you between $281 and $2,789 per employee. Penalties increase per offense. A third offense can cost you as much as $27,894 per employee. You can also lose government contracts and even your business license.

That’s why it makes sense to partner with an E-Verify staffing firm like Nesco Resource when hiring temporary labor. We are committed to e-verifying every temporary associate we hire for you.

Tariffs Will Play a Role

The ever-changing tariffs are stirring uncertainty in the staffing industry and elsewhere. How will it affect the U.S. job market? It depends on who you ask. An analysis by Goldman Sachs asserts that the president’s broad-based tariffs will mean fewer jobs overall. But some industries – like construction and manufacturing – anticipate growth. The last time the Trump administration imposed tariffs on aluminum and steel in 2018, the U.S. increased production of steel by 6 million metric tons and aluminum output by 350,000 metric tons.

At the moment, trade tensions are eroding both consumer and business confidence which can slow GDP growth. Experts at the Tax Foundation predict the tariffs will reduce after-tax income by an average of 1.2%. If consumers constrict spending due to higher prices and economic uncertainty, job creation in the manufacturing and construction industries may not happen as quickly as anticipated. However, the Federal Reserve might cut interest rates by mid-year to encourage spending and home purchases.

U.S. Federal Reserve Chair Jerome Powell still believes there’s reason for cautious optimism. In a speech in Chicago on April 16, he noted that the economy is still in a solid position with the labor market near maximum employment. He pointed out that tariffs and the economic effect of them are larger than anticipated which will have the economic effect of higher inflation and slower growth.

What This Means for Your Business

Some companies may put a hold on hiring or expanding their business until the economic uncertainty abates. In certain industries, however, tariffs will likely add jobs.

If you’re in an industry like aluminum and steel manufacturing or construction, you may need to staff-up as quickly as possible. That’s where a staffing company can help. They have the dedicated recruiters and a large database of talent that’s ready to fill your open positions. And, if a staffing company doesn’t have the people to fill the positions, they will use advanced recruiting tools and hold job fairs to help you hire.

Layoffs Will Add a Pool of Experienced Workers in Some Fields

While some industries – like agriculture, hospitality, and construction – will struggle to find enough labor to fill their roles, other fields are in the midst of an influx of workers searching for jobs. In recent months, the federal government has offered buyouts to approximately 75,000 federal employees and laid off tens of thousands more. USA Today reported that while there is no official count yet of how many have been laid off, the number could easily surpass 100,000.

There’s also a large pool of labor available in the retail industry. In the past six months, retail workers have also experienced a surge in layoffs with large retailers like Joann Fabrics closing their doors. In just the first two months of 2025, retailers cut 409,000 jobs.

What This Means for Your Business

If you’re looking to fill jobs in certain industries like healthcare, retail, or education, you could have an influx of skilled labor vying for your positions. Large cuts in the Veterans Health Administration, Department of Education, and big-box stores mean you won’t experience the same labor shortages that other industries are struggling with.

The Rise of Skills-Based Hiring

Degrees and credentials are no longer the only markers of a qualified candidate. Historically, companies put a heavy emphasis on formal education when hiring. But now, more companies are emphasizing real-world skills over formal education. According to the U.S. Bureau of Labor Statistics (BLS), the high-skilled service sector is on the cusp of a boom.

Healthcare, professional, finance, and business services are poised for the most employment growth by 2032
The growth is indicative of a continuing shift toward a high-skilled services economy
This transition may be fueled by increased productivity and the adoption of AI
Mathematicians, engineers, and software developers are among the positions poised for the most employment growth by 2032
The BLS is also projecting growth (in lower numbers) in manufacturing, construction, machine operators, transportation, warehousing and surveyors
They predict the market will contract for administrative assistants, cashiers, data entry, and office support

What This Means for Your Business

Traditional hiring – based on degree and job title – was easier to do. You only had to see if the candidate checked the right education and title boxes before deciding whether to keep them in the pool of applicants. Now, hiring managers need to assess if candidates possess the relevant skills to perform the role effectively. This includes not only technical and transferable skills, but soft skills as well, which are not as easy to assess. A hiring manager can determine if the candidate has the essential qualifications through practical tests, behavioral questions, and a portfolio review, among other things.

Because of the focus on more skills-based hiring, job descriptions need to evolve too. A staffing agency can help you rethink what “qualified” looks like and write more inclusive job descriptions for you. They can also help you with behavioral interviewing, whether that be performing those interviews for you or coaching you on how to complete behavioral interviews with candidates.

Return-to-Work Policies and the Removal of DEI Practices Are Affecting Talent Retention

A survey from ResumeBuilder found that 8 in 10 employers lost talent to return-to-office (RTO) mandates. Those companies reported that they were more likely to lose high performers and senior staff to competitors that offered more flexibility.

Some believe the RTO policies are a smokescreen for reducing the workforce through voluntary layoffs. In a survey by BambooHR, a quarter of C-suite executives and one-fifth of HR professionals admitted that they hoped for “back-channel layoffs” as they referred to it.

Another potential roadblock to retention is the change in DEI practices. Though it’s not known yet how many companies will roll back their DEI policies to be in alignment with the White House’s executive order, the Society of Women Engineers believe that the effects of this shift will particularly impact black women. They believe the reduction or elimination of DEI policies can lead to:

A widening pay gap
Workplace discrimination or microaggressions
Slower progress toward leadership roles
A reduction in innovation
Strained talent retention

What This Means for Your Business

Every company has to decide what works best for them, but there is a business case for inclusive hiring. Organizations with high diversity in hiring report 19% higher innovation revenue than their less-diverse competitors.

Similarly, the Society for Human Resource Management (SHRM) points to the benefits that flexible work arrangements offer. Those benefits include improved morale, easier recruiting, improved retention, and more productivity.

How Nesco Resource Can Help

With such a challenging job market in 2025, a staffing agency is more helpful than ever. Not only is Nesco Resource an E-Verify staffing firm, we also have the talent pool and knowledge to help you find the candidates you need to fill your open positions. We’ve been helping companies and job seekers connect since 1956. As a nationally ranked workforce solutions company, we help you find talent while ensuring your hiring process is compliant, efficient, and future proof. We’re here to help you build an e-verified, skillful contingent workforce that drives your business forward.