After several years of expansion, the U.S. economy may be running out of steam. In a March forecast that did not account for a broad set of import tariffs imposed in early April, S&P Global said U.S. gross domestic product growth would slow from 2.8% in 2024 to 1.9% in 2025 and 2026.
Other forecasters are more pessimistic, predicting negative economic growth or an outright recession later in 2025.
With so much uncertainty in the short-term economic outlook, it’s no wonder many businesses are pulling back on hiring and delaying investment decisions. In this newly lean macroeconomic environment, businesses large and small would do well to take a closer look at their plans to staff up — or not — for the remainder of 2025, seasoned executives say.
“Periods of uncertainty do not lend themselves to bold, risky investment decisions,” says Karim Allana, founder and longtime leader of Allana Buick & Bers (ABB), a California-based construction and engineering firm.
Does that mean you should freeze hiring until further notice? Not necessarily, Allana says. Your firm may be in better shape than its direct competitors, or firms in other industries, and could actually benefit from adding staff.
Nevertheless, Allana recommends thinking carefully about your next move. Before filling any open or newly created roles, ask these seven questions of yourself and your leadership team.
1. Am I Hiring to Replace a Departing Employee?
It’s difficult to justify eliminating a role immediately after its occupant leaves. The path of least resistance would certainly seem to involve filling the role as soon as possible, and spreading its duties among remaining employees until that time.
Often, this reaction is the correct one. Eliminating a productive role can cause more problems, and prove more expensive, than expeditiously filling it. The bar for making a hire in this circumstance is lower.
However, that’s not always the cause. If you can make do without the departed employee — and we’ll see how to think about that in a moment — than perhaps you should.
2. Who Else Is Leaving in the Coming 2-4 Quarters?
One departing employee might deliver an unfortunate but survivable blow to your business. However, if you have visibility into other possible personnel moves in the near future, you may know that more hits are coming.
In this case, you may need to triage the open or soon-to-be-open roles. Evaluate each in turn, decide which (if any) can be left unfilled for now, and determine which to prioritize for hiring.
3. Is It Worth the Cost to Replace This Person?
Leaving a role unfilled carries a cost, possibly a steep one. So does replacing an employee. In fact, the hiring process is surprisingly expensive, coming in at 50% to 60% of the total salary for a typical role and often much more than that for more specialized jobs, according to SHRM.
Cheaper alternatives might exist. Read on to learn more about them.
4. Who Else Can Do the Job?
If you’re facing an unexpected vacancy, you’ve already asked yourself this question. That is, unless the role doesn’t have any duties that need to be completed on a daily or weekly basis, in which case it may not need urgent filling.
The fact is, your remaining team can absorb a departing employee’s duties for weeks, possibly even months, as you work to fill the position. As time goes on and the team becomes more comfortable with those duties, you may come to the conclusion that the role doesn’t need to be filled at all, at least not with any urgency.
5. Can AI Handle Some of the Workload Now?
AI agents are not yet smart enough to “replace” a human employee. However, they are rapidly improving, to the point that some big employers have said publicly that their default is to “fill” open roles with AI unless managers can prove otherwise.
“Teams must demonstrate why they cannot get what they want done using AI," Shopify CEO Tobi Lutke recently said in an internal company memo. Otherwise, he said, they won’t be approved to hire new employees.
Lutke also said that Shopify would incorporate AI into its employee evaluation processes, hinting at more dramatic changes to come soon.
6. Can AI Handle Some of the Workload Next Year? Three Years From Now?
Whether you agree or disagree with Shopify’s approach to hiring in the AI age, you probably believe — like him — that AI will soon be able to handle a lot more of your team’s workload. Maybe very soon.
Tackle this problem head on by asking these two basic, direct questions: How much of this role’s work will AI agents be able to handle by next year? And how much more could they do two years after that?
If you sit with it for a while, the answer might surprise you.
7. What Does Our Growth Curve Look Like?
Finally, it’s time to break out your revenue projections and company budgets — and do your best to predict the future.
This is an easier lift than forecasting AI’s impact on your business. The question before you is simple: Based on revenue expectations for the next one to two years, can our company safely add new employees? And if not, when might that change?
Hire, Fire or Stay the Course?
Most of the above considers only two options: filling a new or vacant role, or making do without a new person on staff.
As you know, you have at least one more choice: eliminating existing, currently filled roles.
We haven’t talked about that because it is, of course, a much more difficult decision to make, particularly in a small-company setting. One that negatively affects the livelihoods of people you’ve come to know, if only by association, rather than merely eliminating a job opportunity for someone you don’t.
Unfortunately, in uncertain times like these, reducing headcount could be the proper course of action. If you’re not sure where your company’s revenue or bottom line will be in a year’s time, and you have reason to believe its cash flow could stagnate or fall, cutting costs may be the prudent thing to do. Even if it causes some hardship.
Let’s hope it doesn’t come to that.
