Current Conditions: Employment Assessment Remains Less Optimistic
HR executives rated current employment conditions in Q3 2025 as consistent with Q2, noting little change. In Q3 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 14% perceiving conditions as poor or very poor (1% very poor, 13% poor).
After a decline in positive ratings in Q2, evaluations of employment conditions remained stable. The proportion of HR executives rating employment conditions as excellent or good has stayed the same, while ratings of fair have also stayed the same, and poor or very poor ratings have risen by 1 percentage point. These results suggest evaluations of employment conditions have stabilized after last quarter's decline, though overall they remain muted, with most HR executives viewing conditions as fair.
Employment Forecast: Negative Expectations Moderate, But Executives Remain Cautious
The U.S. labor market showed lower-than-projected growth in early Q3, with total nonfarm employment seeing an underwhelming 73,000-job increase in July. The health care sector continued to show growth with 55,000 new jobs in July, while federal government employment declined by 12,000 jobs. The unemployment rate for July was 4.2%, which remained relatively stable throughout 2025.
Despite a relatively stable assessment of current conditions, we see notable shifts in expectations for the next six-month period. Twenty percent of HR executives now anticipate poor or very poor employment conditions — the second-highest level in years — though this marks a 7-percentage-point decline from the Q2 peak of 27%. Conversely, 32% foresee good or excellent conditions, an increase of 4 percentage points since last quarter. However, nearly half (48%) still predict fair conditions.
While expectations have improved since last quarter, the share of HR executives anticipating poor employment conditions remains among the highest seen in recent years.
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Budget Growth Expectations Rebound But Remain Below Prior Levels
With the overall labor market showing less growth than predicted in July 2025, the continued federal workforce cuts and potential impacts of reinstated tariffs indicate labor market uncertainty.
HR executives' assessments of the economic environment and forecasts for business performance align with lower-than-usual expectations for increases in total rewards and recruiting budgets, even with a rebound since Q2 2025. In Q3 2025, 44% of HR executives anticipate an increase in their total rewards budget, a 13-percentage-point jump from Q2 2025 and a 6-percentage-point decline from Q3 2024. About 2 in 5 expect their total rewards budget to remain unchanged (41%), while 15% anticipate a decrease. The rebound from last quarter suggests some recovery, but HR executives' expectations have not yet returned to the levels seen in previous quarters.
Similarly, only 22% of HR executives expect growth in their recruiting budget, a 5-percentage-point increase from last quarter. The majority (64%) foresee no changes, and 15% expect a decrease.
| 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% | 8% | 35% | 41% | 11% | 3% | 1% |
| Recruiting Budget | 1% | 4% | 16% | 64% | 9% | 3% | 3% |
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Takeaways/Implications
15%
of HR executives anticipate a decrease in total rewards budgets over the next six months.
15%
anticipate a decrease in recruiting budgets during the same period, while 22% expect an increase.
Compensation Trends: Salary and Wage Growth Expectations Rebound But Remain Lower Than Usual
Similar to budget projections, fewer HR executives than usual anticipate increases in annual salaries and hourly wages over the next six months, even with observed growth this quarter. In Q3 2025, 66% of HR executives anticipate a rise in annual salaries over the next six months — marking a 10-percentage-point increase from Q2 2025. Similarly, 57% expect hourly wages to increase during the same period, reflecting a 6-percentage-point increase from Q2. 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 (44%) of HR executives expect an uptick in cost per hire, a marginal decrease since Q2 2025. Meanwhile, over half (52%) predict no change in hiring costs, again consistent with Q2 2025. These metrics have been stable throughout 2025.
| 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% | 4% | 62% | 41% | 2% | 1% | <1% |
| Hourly Wages* | 0% | 3% | 54% | 41% | 2% | 0% | <1% |
| Cost Per Hire* | 1% | 7% | 36% | 53% | 2% | 1% | <1% |
* = New in Q2 2024
HR Executives Report Lowest eNPS Growth Expectations Since Tracking Began
In Q3 2025, 1 in 4 HR executives (25%) anticipate an increase in their eNPS/employee engagement, marking a 5-percentage-point decrease compared to Q2 2025 and the lowest number since tracking began. Meanwhile, just under half (49%) predict no change, a 3-percentage-point increase from Q2 figures. This marks the lowest level of optimism for eNPS growth among HR executives since the start of data collection.
| 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% | 2% | 22% | 49% | 19% | 6% | 2% |
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Fewer HR Executives Predict Productivity Increases
In Q3 2025, more than 1 in 3 HR executives (35%) anticipate a rise in overall productivity — a 2-percentage-point decrease from Q2 2025 — while just over half (51%) foresee no change. However, more HR executives expect revenue per employee to grow in the next six months (40%), reflecting a 6-percentage-point increase from Q2 2025, whereas 40% predict no change, an 8-percentage-point decrease since Q2. Notably, 20% expect a decrease in revenue per employee, a 1-percentage-point increase from Q2. Given the lower-than-usual expectations for revenue growth this quarter, the decline in productivity expectations aligns with the broader sentiment. Even so, expected revenue per employee increased to 40%, which is the second-highest level since tracking began.
| 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% | 5% | 31% | 51% | 10% | 3% | 1% |
| Revenue Per Employee** | 0% | 5% | 35% | 40% | 18% | 1% | 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 |
| Q3 2025 | n = 307 | 07/09/25 – 07/21/25 |
Read the Q3 2025 series:
CHRO Employment Outlook | CHRO Economic Outlook | SHRM Hiring & Retention Difficulty Indexes