With the labor market cooling, experts have said that now is the best time for employers to invest in their existing employees. The only problem is that companies aren’t actually doing that.
That’s according to recent research from Workday. Despite a modest increase in hiring demand in the first half of this year, internal hiring and promotion rates have actually fallen.
Hiring demand was up 6% year-over-year in the first half of 2025, down slightly from the 7% YoY increase in the first half of 2024, according to Workday’s internal data and external surveys.
However, internal hiring fell 8% YoY, and only 30% of all hires in June were internal. Additionally, promotion rates fell in 10 of the 11 industries tracked by Workday; manufacturing was the only one to see an increase in promotions.
“It is pretty rare for 10 industries to see a promotion recession all at the same time,” said Phil Willburn, VP of people analytics, insights, and experiences at Workday. “That was very surprising to me in our latest data.”
It’s creating some frustrations. More than 57% of job seekers feel stuck in today’s labor market, according to one of the surveys conducted by Workday for the report. (High performers, who are often more likely to land opportunities even in cooling markets, aren’t feeling so stuck, though: Attrition for high-performing employees was up in every single industry, with the largest spikes being in retail and healthcare, up 64% and 28% YoY.)
AI transformation may be to blame, Willburn said. Many companies have been eager to adopt the new technology, but haven’t necessarily focused on training their workers to use it. (Just 21% of business leaders surveyed by Workday believe investing in AI tools and upskilling will be a key retention driver in the next year.) Instead, they’re focused on getting these skills from external hires, which may push high-potential employees out the door.
“You need to have a clear and strong narrative around AI, because high performers, above anything else, they need growth,” Willburn said. “They want growth, and as soon as they feel slightly stagnant, they’re the ones who always have opportunities.”
Workday’s data is yet another sign that HR leaders need to be involved in AI strategy with their C-suite peers, according to Willburn. Without a clear roadmap and communication around AI, workers will be left in the dust, lacking critical skills and fearing displacement. (Relatedly, 44% of employee comments about strategy and AI were negative.)
“When all of these tools are being rolled out, and then the CEO is like: ‘Why aren’t we adopting when we’re spending this much money?’ This is when HR is now coming in and saying, ‘This is how you actually drive behavior change,’” Willburn said. “My hope is that this is a wake up call for many organizations, and that then HR steps in and you’re going to see this improve in the near future.”
This report was originally published by HR Brew.
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