2026 Workforce Trends to Watch

As we step into a new year, it’s essential to reflect on the forces that shaped the labor market in the previous 12 months and anticipate what lies ahead. 2025 was marked by cautious optimism, selective investment and a growing reliance on technology — all against a backdrop of economic uncertainty and geopolitical complexity. 

In this article, I’ll share my assessment of the trends that defined the world of work in 2025 and what workforce leaders can expect in 2026. If you prefer to watch or listen – you can catch the video version here.

Mega Trends That Shaped 2025 in the US

At the beginning of the year, economists expected a slowdown for the US. We knew that this wasn't going to be, by any means, a comeback year. In Q4 of 2024, the Philadelphia Fed projected that unemployment was going to be around 4.5%, and other economists anticipated that the job gains would drop to about 75,000 per month. So, the forecast heading into 2025 was really this gentle deceleration, where wage growth was going to stabilize and the labor market was going to find a balance, despite policy uncertainty. 

In actuality, Q1 of 2025 began with a solid start. Looking at our Acumen® Intelligent Workforce Platform data, there was some real optimism in the air, because we saw some pretty steady hiring from January into early March. However, in March we began to hear rumblings of tariffs, and in April the formal announcement was made. That is when companies shifted into this no-hire, no-fire mode. We saw job growth really slow through the summer months. I would say May and June were okay, but then in July, job additions plunged to 73,000, and then all those earlier months were also revised down. Now, we did see a slight rebound in September, October and November; however, they weren't able to sustain that same momentum. But again, when I looked at our Acumen data, we did hire more in Q4 than in Q2. So, although I don't think we ended on a high note, there was some nice optimism heading into the end of last year.

Unemployment hovered around 4% to 4.2% for the first half of the year, and rose to 4.6% in November, but I still don't think this is cause for alarm. I would say 2025 was an overall stagnant labor market. Companies were investing more in AI over people, and because of this, job seekers really felt that pinch. They just didn't have confidence in the labor market. There was this fear of “If I were to leave my current organization, I'd be the last one in and then maybe the first one out if layoffs occur,” so everyone was sitting tight. Wage growth did stabilize, but real wage growth only increased by 0.8%, so that just means that our dollar isn't going as far as it did five-plus years ago.

A few major headwinds shaped the labor market in 2025. Policy uncertainty, tariffs and immigration restrictions shook a lot of business confidence, and high interest rates cooled investment. There were also some obvious labor sector imbalances. Growth was highly concentrated in healthcare, social assistance and hospitality, and we continued to see manufacturing and professional services lag behind. 
I would be remiss if I didn't mention layoffs — there were over a million in 2025, including 300,000 federal workers. And, from a retirement standpoint, 10,000 baby boomers are retiring daily. I also like to keep a close eye on the youth (ages 16-24) unemployment rate. Male youth unemployment rate in 2025 was still high at about 11%. So right now, we have ongoing labor shortages, despite slower hiring.

I would say bottom line, 2025 was by no means a collapse — it just wasn't smooth sailing. It was a year marked with hesitation as businesses were cautious and investing selectively in tech. Workers faced a lot of uncertainty as a result. Policymakers were juggling inflation control, while at the same time, trying to drive growth. So, the big question, I think, for 2026 for the US and North America is: “Is this year going to bring more clarity or will we still face a lot of turbulence?”

2025 Trends in Europe

In Europe, the labor markets appeared strong, but there were also some visible cracks. Growth was modest. In the Eurozone, there was about 1% growth. And even then, hiring was selective. Despite record employment, skilled roles remained hard to fill, and that created this paradox of high employment alongside vacant roles. There were some stark regional differences as well. Germany was at near-full employment at 3.5% while Spain faced 10% unemployment. In the UK, vacancies have been down 44% since 2022, yet employment still slightly declined.

Mega Workforce Trends Shaping 2026 

2026 will present several challenges for business leaders, and based on my research, I've come up with three standout hurdles. 

Scaling AI and Digital Transformation

Making the move from pilots to full-scale integrations is going to require machine learning engineers, data scientists and specialist roles that focus on AI ethics, regulatory compliance and risk management. Hiring managers may also need to look at people with hybrid skill sets that combine tech literacy with the domain experience — for example, a financial professional that also has predictive analytics experience.
As AI continues to evolve, and adoption increases, we’re going to see a higher demand for change management leaders, AI product managers and learning and development experts. It's going to require a mix of high-tech talent and domain experience to really deliver and implement.

Hiring the Right People

Federal financial data provides a reason for optimism, indicating that we could experience increased hiring rates this year. The US Fed cut interests rates three times in 2025, which should ease pressure on companies that may have delayed investing in hiring last year. Looking ahead to 2026, companies will need to focus on targeted hiring and seek out specific skills rather than hire for broad experience — shifting from traditional recruitment to predictive talent strategies. Hiring managers will need to deconstruct roles into tasks. They will need to look beyond job descriptions to thoroughly uncover every activity that's related to the role, so that they can make sure that they’re hiring people who will be the right long-term fit for the organization.

Navigating Uncertainty

And then, of course, there's going to be a lot of uncertainty. I think this is going to be something that's quite like what we experienced in 2025. So, we're all going to be faced with economic conditions and policy changes. At this point, we still haven't fully realized or understood the impact of tariffs on business. Additionally, geopolitical tensions are adding even more complexity. There's quite a bit for organizations to navigate, and I don't see that changing in 2026.

2026 Trends in Europe

In Europe, hiring is going to be even more focused. Companies aren't just looking for broad experience anymore; they're zeroing in on specific skills. In the region, we're going to see AI play an even bigger role in how candidates are screened. There are several forthcoming EU regulations and legislation that will impact how hiring gets done. I also think that flexible work will remain a hot topic, skills-based credentials will continue to gain traction and we'll see even more growth in sustainable energy roles, technology and automation — and this is all going to continue to reshape and evolve the European labor force. It will also alter how organizations within those countries go about getting that work done, meaning that organizations are going to need to move fast and they're going to have to figure out how to balance innovation with smart workforce planning.

Supporting Our Clients with Data-Informed Decision Making

With continuing uncertainty, cost savings have continued to be a high priority for our clients. To help our clients achieve their goals, our analytics teams at Allegis Global Solutions have been busy with a myriad of requests to support data-informed workforce planning. Here are a few of our most requested services that our teams delivered in 2025, and how they’ve helped our clients navigate complexity with confidence. 

Cost-Savings Playbook

The cost-savings playbook is very popular. It's where our analysts conduct a thorough review of the customer’s data. They dive into tenure rebates, volume rebates and overtime management to see which potential cost savings levers we can pull that make most sense for the overall business.

Comparative Wage Analysis 

In a comparative wage analysis, we dig into wage trends, comparing rates by region and industry. To do this, we leverage data from Acumen as well as a few other data sources, like Lightcast, to help provide us with a global view across multiple countries. We also perform a lot of rate card analysis on an annual basis, which is where we analyze worker starts for the past 12 months and suggest small strategic adjustments to the rate card. This is to ensure we are keeping our customers' pricing competitive, while also helping to manage their overall spend. 

Misclassification Analysis

Our misclassification analysis continues to gain a lot of momentum. This is where we identify roles that are filled under a statement of work that should have been classified as staff augmentation. We can help our customers realize considerable cost savings by analyzing how hiring managers are going about buying and procuring their talent.

Current AGS Managed Services customers who may have similar requests or are for support in developing their 2026 workforce planning with guidance from our market analytics team can contact their program leader.