What's Happening?
In 2025, the nonprofit sector experienced significant instability due to funding disruptions, leading to a more competitive and less stable job market. Many nonprofits, which had been rebuilding their staffs after COVID-era cuts, were forced to downsize,
freeze hiring, or eliminate programs as federal grants were paused or retracted. This resulted in a tightened job market with increased competition for fewer stable roles. According to Rusty Stahl, president and CEO of Fund the People, the sector is facing prolonged uncertainty, making it difficult for organizations to plan for the future. The Center for Neighborhood Technology in Chicago, for example, lost 27% of its funding, leading to layoffs and pay cuts. National surveys indicated a sharp decline in hiring expectations, with many nonprofits planning layoffs or slowing hiring. The nonprofit job board Idealist reported a 75% increase in applications, reflecting intensified competition for social-impact roles.
Why It's Important?
The instability in the nonprofit sector has significant implications for U.S. communities and the broader economy. Nonprofits play a crucial role in providing services and support to vulnerable populations, and disruptions in their operations can have widespread social impacts. The increased competition for nonprofit roles suggests a growing interest in mission-driven work, but also highlights the challenges of securing stable employment in the sector. The funding cuts and policy changes affecting nonprofits could lead to reduced services and support for communities in need. Additionally, the sector's reliance on government funding makes it vulnerable to policy shifts, which can further exacerbate instability. The contraction in the nonprofit workforce also reflects broader economic uncertainties and challenges in the labor market, impacting both job seekers and organizations.
What's Next?
As 2026 progresses, nonprofits are likely to continue facing challenges related to funding and workforce stability. Many organizations remain cautious about hiring, even if funding is restored, due to fears of future cuts. The Independent Sector's report indicates that workforce strain extends beyond layoffs, with many nonprofits choosing not to fill open positions. Changes to charitable tax incentives and programs like AmeriCorps could further impact the sector's ability to attract and retain talent. Fund the People is advocating for a funding model focused on workforce investments, which could help stabilize the sector. However, the ongoing uncertainty about government stability and funding could continue to complicate recruitment and retention efforts.
Beyond the Headlines
The current challenges in the nonprofit sector highlight deeper issues related to funding models and workforce sustainability. The reliance on government grants and contracts makes nonprofits particularly vulnerable to policy changes and economic fluctuations. The sector's struggles with burnout and retention also point to the need for better support and investment in nonprofit workers. The exploration of new funding models, such as Staff Operating Support, could provide a more sustainable approach to workforce management. Additionally, the increased interest in mission-driven work from private sector candidates suggests a potential shift in workforce dynamics, with more individuals seeking meaningful employment opportunities.
