2025 Midyear HR Checkup: Layoffs, DEI Pivots, and an Unsettled AI Future

By late August 2025, human resources leaders find themselves at a crossroads. Economic pressures, political shifts, and technological experimentation are combining to create one of the most turbulent midyears in recent memory.

“It’s not yet Halloween, but things in the HR world could be summed up as ‘spooky,’” said Zach Nunn, CEO of experience management firm Living Corporate.

Layoffs and Shrinking People Investments

U.S. companies have ordered HR teams to conduct a record number of layoffs this year, often in repeated waves. A Careerminds survey described the trend as “serial” workforce reductions. But the bigger concern, according to Nunn, is what happens to those who remain.

“The reality is that people initiatives are just not being invested in,” he said. “What we’re seeing is a large-scale divestment from the employee experience in the day-to-day work, and that’s a scary place to be in, because if we’re not going to be investing in people, how do we create healthy experiences for customers?”

The strain is showing inside HR itself. A SHRM State of the Workplace report found that 62% of HR professionals are stretched beyond capacity, and 57% say their teams are understaffed.

AI Adoption: From Hype to Headaches

Artificial intelligence was supposed to be HR’s next big advantage. Instead, cracks are appearing in its rollout. A May Owl Labs survey found that 67% of employers have integrated AI tools, but results are mixed.

“The learning curve involved is often too steep,” said Emily Rose McRae, senior director analyst at Gartner. “That is unfortunately not terribly realistic,” she added, noting that workers often lack the training needed to use AI effectively.

Even where AI is in play, its impact is underwhelming. “The tools don’t have a drastic impact on productivity,” McRae said, pointing to MIT research that showed 95% of enterprise AI pilots had no measurable effect on profit and loss.

“That is really a tricky spot to be in,” McRae continued. “HR has a responsibility around training, but it also has a role in reshaping executives’ expectations and getting people to reimagine the outcomes that are possible.”

Nunn warned against over-reliance: “Unfortunately, we’re seeing large-scale applications of AI when it comes sourcing, recruiting and background checks — essentially seeing whole HR departments being replaced by one bot.” Instead, he argued, “there’s an opportunity…to upgrade the role, not necessarily replace the role.”

DEI in Transition: From Political Pressure to Business Alignment

The reelection of President Donald Trump has accelerated a federal crackdown on diversity, equity and inclusion programs. Surveys suggest as many as 1 in 5 employers have already dropped their DEI initiatives in 2025.

Yet some companies are adapting instead of retreating. Meal delivery firm Feast & Fettle has tied its DEI strategy directly to employee advancement and customer value.

“My lens on this is that there was a lack of understanding or intentional design around what value having equity in your workforce provides to your organization,” said Kyla Hanaway-Quinlan, COO and head of people at Feast & Fettle. “Your systems have to work towards the goal you’re trying to accomplish.”

For her, DEI isn’t about quotas or box-checking. “Lived experiences are not just an experience of when you’re filling out your EEOC form and what boxes you’re checking,” she said. “It’s broader than that.”

McRae noted a broader trend: “I am seeing a strong shift toward inclusion in DEI work,” she said, as companies emphasize measurable business outcomes and long-term retention.

The Talent Market: Not as Employer-Friendly as It Looks

Mass layoffs and AI-driven workforce reductions might suggest a job market tilted toward employers, but analysts caution that appearances can be deceiving.

“I don’t get the impression that employers are totally comfortable with that shift,” McRae said, pointing out that top candidates still expect flexibility, niche benefits, and meaningful career development.

Nunn agreed HR must tread carefully. “The last thing you want to do is go along with [AI rollouts] and then realize you also don’t have a job,” he said.

Return-to-Office Tensions Persist

Return-to-office (RTO) policies remain another flashpoint. Some companies, according to a Resume Templates report, use office mandates as a form of “quiet firing.”

But employees notice weak justifications for RTO. “Employees are well aware when employers have RTO strategies that are based on employer convenience or policy agreements,” McRae said. “If you say it’s because of collaboration or team-building, you better be delivering that.”

Nunn, a father of four, added a personal perspective: “If you have employees who need various things, and you’re inflexible on how to provide those things, you’re not going to have an effective workforce or customer experience.”

Looking Ahead: HR’s Balancing Act

The second half of 2025 will likely bring more layoffs, continued uncertainty around AI, and sharper scrutiny of DEI. For HR leaders, the task is to balance business demands with human realities.

“Things shift all the time,” Nunn said. “What you don’t want is to have people who are resentful to be here. It’s best to lead with kindness even if you have the capacity to be cruel.”

Originally reported by Ryan Golden in Construction Dive.