The U.S. labor market may be losing some heat, but middle market companies aren’t hitting the brakes. According to the RSM US Middle Market Business Index (MMBI) Special Report: Workforce 2026, more than half of middle market executives—52%—expect moderate to significant hiring needs over the next year, even as broader employment trends soften.
Released by RSM US LLP in partnership with the U.S. Chamber of Commerce, the report paints a nuanced picture of a labor market in transition. Hiring demand remains real, but it’s uneven, more selective, and increasingly shaped by skills shortages, rising labor costs, and a growing reliance on technology—especially artificial intelligence—to fill productivity gaps.
In short: middle market firms still want to grow, but they’re rethinking how they build and support their workforces.
A K-Shaped Labor Market Takes Hold
The headline finding—continued hiring plans amid a cooling economy—comes with an important caveat. Not all middle market firms are experiencing the same conditions.
The survey, conducted in Q4 2025, found that 62% of companies with annual revenues between $50 million and $1 billion expect notable hiring needs over the next year. That figure drops sharply to 38% among firms in the $10 million to under $50 million range.
“The labor market has slowed down materially compared to previous years, though that slowdown is not the same for everybody,” said Tuan Nguyen, economist at RSM US LLP. “We are seeing that K-shaped economy evolving even more; you have bigger firms still in good shape, but smaller firms struggling a little bit more.”
That divergence reflects broader economic dynamics. Larger middle market firms tend to have stronger balance sheets, more pricing power, and greater ability to invest in technology or outsourcing. Smaller firms, by contrast, are feeling the squeeze from higher wages, tighter margins, and limited access to specialized talent.
Still, the overall signal is clear: hiring isn’t disappearing—it’s becoming more complex.
Hiring Is Harder Than It Used to Be
Among executives who expect at least moderate hiring needs, 84% say filling open roles will be somewhat or very challenging. That’s a sharp jump from 66% when RSM last ran a similar workforce survey in late 2023.
The reasons are familiar—but no less stubborn:
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Lack of available qualified workers
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Rising labor costs
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Geographic competition for talent
For many middle market firms, the problem isn’t a lack of demand for labor—it’s a mismatch between the skills they need and the talent they can realistically attract or afford.
“As employers deal with all of these challenges, the ability to more precisely manage the workforce is becoming a bigger priority, and the tools to do that are becoming better,” said Chris Mueller, managing director in RSM’s human capital management practice.
That comment hints at one of the report’s central themes: workforce strategy is becoming less about raw headcount and more about optimization.
Return-to-Office: Still Unsettled
Workplace policy continues to reflect that uncertainty. The report shows no single dominant approach to where work gets done:
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31% of firms are mandating a return to the office
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25% are considering a mandate
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44% are not pursuing one at all
For HR leaders, this fragmented landscape adds another layer of complexity. Recruiting, retention, and productivity strategies increasingly depend on flexibility—not just in location, but in how roles are structured and supported.
Hybrid work may no longer be the headline debate it once was, but it’s still shaping talent availability and employee expectations in very real ways.
Outsourcing Moves From Exception to Strategy
One of the more notable shifts highlighted in the report is the growing normalization of outsourcing. As firms struggle to find and retain workers with the right skills, many are turning to co-sourced or fully outsourced models to keep operations moving.
Among respondents who identified outsourcing as a major challenge over the next year, the most commonly cited functions under consideration were:
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IT
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Customer service
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Payroll
“With the challenge of finding employees with the right skillset for critical roles, middle market businesses are increasingly turning toward co-sourced or outsourced solutions,” said Ross Krusell, RSM principal and leader of RSM Catamaran, the firm’s outsourced services portfolio.
Interest is particularly strong in HR, payroll, financial accounting, cybersecurity, and managed IT services—areas where compliance risk is high and talent shortages are acute.
This shift reflects a broader rethinking of what must be done in-house versus what can be delivered more efficiently through specialized partners. For many middle market firms, outsourcing is no longer just a cost decision—it’s a talent strategy.
AI Becomes a Core Workforce Lever
If there’s one area where confidence appears stronger than caution, it’s technology investment. Nearly three-quarters (74%) of respondents expect to increase spending on AI over the next two years.
Other top investment priorities include:
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Cybersecurity (71%)
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Cloud technologies (63%)
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Communications tools (62%)
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Human capital management systems (44%)
Among firms planning or considering AI investments, 85% cited boosting employee efficiency or productivity as the primary driver.
That emphasis is telling. Middle market leaders aren’t looking at AI as a replacement for people—at least not yet. Instead, they see it as a way to help existing teams do more with less, especially when hiring remains difficult.
This aligns with another key finding: among companies that expect staffing challenges, the top responses planned or under consideration over the next year are skills training (62%), investing in AI (61%), and preparing for AI (59%).
In other words, technology and talent development are becoming inseparable.
Skills, Not Just Seats, Define the Future of Work
The report reinforces a growing consensus across HR and workforce research: the real constraint isn’t labor availability—it’s capability.
Middle market firms are increasingly focused on upskilling existing employees, rather than relying solely on external hiring to close gaps. AI tools, automation, and modern HCM systems are viewed as force multipliers, not silver bullets.
That perspective is echoed by the U.S. Chamber of Commerce, which partnered on the survey.
“The nation’s workforce development programs should align with tools like AI and automation as these technologies continue to transform the modern workplace,” said Stephanie Ferguson Melhorn, executive director of workforce and international labor policy at the Chamber. “That means pairing innovation with skills training and credentialing opportunities so employees can shape how these technologies serve them.”
The implication is clear: firms that invest in both technology and people will be better positioned to navigate ongoing disruption.
What This Means for the Middle Market
Taken together, the findings from the Workforce 2026 report suggest a middle market that is cautious—but far from stagnant.
Yes, the labor market is cooling. Yes, hiring is harder than it was a few years ago. But middle market companies are responding with a more sophisticated playbook:
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Targeted hiring instead of broad expansion
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Skills development over pure headcount growth
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AI and automation to extend productivity
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Outsourcing to access scarce expertise
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Flexible workplace strategies to stay competitive
Only 10% of respondents said they don’t expect to hire at all in the coming year, and just 4% anticipate reducing their workforce. That’s hardly a retreat.
Instead, it points to a labor market recalibration—one where success depends less on how many people a company can hire, and more on how effectively it can deploy, support, and augment the workforce it already has.
For HR and business leaders in the middle market, the message is both sobering and optimistic: the challenges aren’t going away, but neither is the opportunity to rethink work for the better.
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