How a Year of Funding Whiplash Reshaped the Nonprofit Work Force

After years of rebuilding their staffs from COVID-era cuts, nonprofits entered 2025 expecting to keep hiring. Instead, many found themselves cutting back.

Federal grants were paused or clawed back; contracts once thought secure fell through, and organizations that spent years stabilizing their work forces were suddenly forced to downsize, freeze hiring, or eliminate entire programs. The result was a nonprofit job market that tightened abruptly.

As 2026 gets underway, the nonprofit work force faces prolonged uncertainty, with fewer stable jobs, more competition, and little clarity about what comes next.

“There’s a lot of instability right now, and it’s hard to know how the ripple effects of the funding cuts and the policy changes will continue to roll out across the field,” said Rusty Stahl, president and CEO of Fund the People, which advocates for greater investment in the nonprofit work force. “It makes it really difficult for organizations to plan what’s next.”

In communities across the country, that uncertainty has forced organizations to make abrupt and often painful choices.

In Chicago, the Center for Neighborhood Technology, which seeks to create equitable, sustainable urban neighborhoods, lost about 27 percent of its 2025 funding for internal operations when some government grants and contracts were canceled or paused. The roughly $1 million loss led to layoffs of five of 20 staff members, pay cuts, and furlough days for senior leaders.

“It was devastating because we were a healthy functional organization,” said CEO Nina Idemudia. “Then, in the blink of an eye, we went to not being able to understand if we were going to get revenue that we had projected on contracts that were already signed.”

For 2026, the organization remains smaller, Idemudia said, but the cuts also allowed it to create  a more sustainable budget.

Hiring Expectations Collapse

National surveys show how sharply nonprofit hiring expectations shifted.

At the end of 2024, 52 percent of nonprofits said they planned to hire new staff in the coming year, according to the Urban Institute. But within the first four to six months of 2025, that share fell to 38 percent. Over the same period, the percentage of nonprofits planning to slow hiring more than doubled, and the proportion planning layoffs rose from 3 percent to 7 percent. Among organizations whose funding had been disrupted it was even higher — 15 percent.

New data from the nonprofit job board Idealist shows that while layoffs are driving much of the contraction, many workers are leaving voluntarily. A late 2025 survey of 537 nonprofit hiring managers and more than 5,300 job seekers revealed that the share of respondents working in full-time nonprofit roles dropped by 10 percentage points from the year before. That change  reflects a job seeker pool that included more people who were unemployed, retired, self-employed, or enrolled in school — not necessarily a wave of workers leaving the sector.

The slowdown is reshaping behavior on both sides of the job market, said Ami Dar, executive director of Idealist. While nonprofit workers are broadening their searches beyond the sector, more candidates from the private sector are seeking mission-driven roles at nonprofits. At the same time, competition has intensified: Idealist tracked a 75 percent increase in applications, with more people competing for social-impact work even as stable roles become harder to find.

Up-to-date data on the nonprofit labor force is scarce, so scholars often rely on surveys or smaller pools of government data. Unlike for-profit employers tracked through monthly federal reports, nonprofit-specific employment data from the Bureau of Labor Statistics is released only every five years, with the next update not expected until 2029. 

Nonprofit employment has been volatile this decade, with many organizations struggling to hire in the wake of the pandemic and falling short of community needs. This latest contraction came after the nonprofit work force began to regain ground from pandemic-era cuts: By 2022 and 2023, many organizations had restored staff sizes to pre-pandemic levels and refilled long-vacant positions. But wages lagged behind other sectors and burnout remained widespread, leaving nonprofits vulnerable when government funding disruptions and economic uncertainty hit last year.

Layoffs and Caution

While layoffs rose across the U.S. economy last year, the nonprofit sector experienced a much sharper contraction. Unlike many private-sector employers, nonprofits often must reduce staff even when demand for their services remains high if they lack the funding to pay salaries.

An analysis by outplacement firm Challenger, Gray & Christmas found that nonprofit organizations cut 28,696 jobs in 2025 — more than quadrupling from the 5,640 cut during the first 11 months of 2024.

In Arizona, where the pausing and suspension of federal grants forced rapid decisions, some nonprofits began downsizing almost immediately, said Michael Morefield, director of marketing and communications at AZ Impact for Good, the state’s association of nonprofits. Others eliminated entire departments or programs. 

“That starts to trickle to the work force — downgrading positions or eliminating positions altogether,” Morefield said. 

Even if funding is restored, many leaders remain reluctant to hire. Monique B. Jones, president and CEO of Forefront, the Illinois nonprofit association, said nonprofits are wary of committing to new staff.

Jones is in touch with nonprofit leaders who say that even when they think they have funding coming, they can’t in good conscience start a program or hire people since the program still may be cut. “There’s just fear,” she said. 

The funding squeeze has also reached some of the sector’s largest organizations. The International Rescue Committee announced major layoffs last year, cutting thousands of positions after U.S. foreign aid freezes and contract terminations forced the global humanitarian organization to scale back.

IRC’s staff fell from around 18,000 to about 10,000 today, said Jeannie Annan, the organization’s chief research and innovation officer and interim senior vice president for people and culture. The nonprofit lost around $400 million from its $1.5 billion budget, she said, affecting services for millions of people worldwide.

Foundations, individual donors, and other government donors have stepped up, and IRC has opened several new offices internationally even as its overall footprint has shrunk.

“Yes, we are smaller. Yes, our budget has shrunk significantly,” Annan said. “But teams have really worked to find other funding, think about partnerships in a new way, and cut costs without cutting care as much as possible.”

More Competition, Fewer Stable Roles

For job seekers, the contraction has created a more competitive and fragmented market.

State nonprofit associations also report shifts in the types of roles available and posted on their job boards. Jones said Forefront has seen more short-term and contract positions, particularly in development, as organizations try to diversify revenue without making long-term commitments.

That shift has intensified competition between longtime nonprofit workers seeking advancement and candidates entering the sector from government or the private sector, often with salary expectations many nonprofits cannot meet.

What 2026 Could Bring

Independent Sector’s 2025 Health of the U.S. Nonprofit Sector report shows that work-force strain extends beyond layoffs. 

With budgets so uncertain, many nonprofits are choosing not to fill open positions. More than 10 percent of nonprofits report having at least 21 percent of positions vacant, according to Urban Institute data cited in the report. Nearly half of organizations say vacancies have hurt operations, and more than one-quarter say they expect to decrease staff capacity in some way over the next year, even as most expect demand for services to increase. Many organizations report persistent vacancies, uneven benefit offerings, and growing difficulty retaining experienced staff.

Independent Sector CEO Akilah Watkins warned that continued uncertainty about government stability could further complicate recruitment and retention. She also pointed to research suggesting changes to charitable tax incentives could reduce giving by nearly $10 billion annually.

“It is highly probable that the nonprofit sector is going to experience a squeeze on resources again in 2026,” she said.

Some nonprofit leaders are also watching longer-term pipeline issues. Uncertainty about programs like AmeriCorps — long a point of entry into nonprofit careers — could reduce the flow of talent into the sector. At the same time, changes to the Public Service Loan Forgiveness program set to take effect in July have raised concerns that fewer workers may be willing or able to stay in lower paid nonprofit roles, particularly in high-cost regions.

Stahl’s organization, Fund the People, is encouraging grant makers to consider Staff Operating Support, a funding model that is restricted specifically for work-force investments like pay, benefits, and HR infrastructure but flexible enough to let organizations respond to changing needs over time. While the idea is still in its early stages, he noted that some funders — including the Levi Strauss Foundation — are exploring piloting the approach.

Behind the hiring freezes and layoffs is a work force stretched thin, Stahl said.

“There’s a hell of a lot of burnout in our sector,” he said. But so many nonprofit workers are determined to remain in the field. “There’s also a hell of a lot of grit,” he said. “This work force is a powerhouse. It’s not going anywhere.”