The job market in 2025 is showing signs of cooling down compared to the booming trends seen during the pandemic era. According to a new poll by WTW, a consulting firm, workers can expect a decrease in their annual raise for the upcoming year. The typical raise is projected to be 4.1% in 2025, down from 4.5% in the previous year. This decline in the size of pay raises is attributed to fluctuations in the supply and demand of labor. Companies are adjusting their salary budgets accordingly, with the expectation that these changes will be finalized by April 1, 2025.
The job market in 2021 and 2022 experienced unprecedented growth, with workers enjoying the fastest pace of salary increases in well over a decade. The surge in demand for workers, coupled with the reopening of the economy and the rollout of Covid-19 vaccines, led to a record number of people quitting their jobs. Companies had to offer higher salaries and incentives like signing bonuses to attract and retain talent. However, the landscape has shifted in 2025, with hiring, job openings, and quits declining, and the unemployment rate increasing. As a result, companies may feel less pressure to offer competitive salaries.
Nearly half (47%) of U.S. organizations anticipate lower salary budgets for 2025, signaling a return to more “normal” market conditions pre-pandemic. The job market is stabilizing, with demand reaching similar levels to those seen in 2018 and 2019. This shift, along with a decrease in inflationary pressures, has positively impacted workers’ buying power. Although the projected 4.1% raise for 2025 is lower than the previous year, it remains relatively high compared to historical trends. Salary growth post-2008 financial crisis had typically hovered around 3%, making the increase to over 4% during the pandemic era a notable deviation from the norm.
The fluctuations in the job market, especially in terms of salary increases, are unprecedented. The job market dynamics leading up to the financial crisis in 2008 and its aftermath had set a different precedent. Salary growth tended to stagnate or even decrease during those times. The spike in salary increases during the pandemic era was a unique occurrence, where demand for labor was high, and companies had to adapt to retain their workforce. This shift in market dynamics is something that experts like Lori Wisper find remarkable and unlikely to repeat in the near future.
Overall, the job market in 2025 is undergoing a period of adjustment and recalibration after the rapid changes seen in previous years. Workers can expect a more stable environment with moderate salary increases compared to the boom experienced during the pandemic era. Companies are adapting to the new normal and revising their salary budgets to align with the current market conditions. It will be interesting to see how these trends evolve throughout the year and how they impact the overall economic landscape.