Due to widespread government layoffs, a large number of highly skilled workers are suddenly on the market—and many are eyeing opportunities in the private sector. I personally know several of these people—smart, seasoned professionals with deep institutional knowledge and serious problem-solving skills. This talent shift presents a unique moment for small businesses and startups willing to think differently about hiring.
What kind of ripple effect could this have across the broader labor market? And what does it mean for your business? If you can attract even one of these experienced workers, it could be a game-changer for your business. But in today’s fiercely competitive hiring environment, how can smaller companies compete with bigger businesses and each other?
To learn more, I turned to Dr. Nathan Mondragon, Chief Innovation Officer at HireVue, a global leader in skills-based hiring, who offers insight into how small businesses can not only attract but truly leverage this wave of displaced public-sector talent.
Rieva Lesonsky: How will this flood of available workers impact the labor market in general?
Dr. Nathan Mondragon: Recent government layoffs present a unique and time-sensitive opportunity for the private sector to access a large pool of highly skilled, mission-driven professionals. Many government workers are accustomed to working in high-stakes, highly regulated environments with limited resources.
These professionals often bring strengths in stakeholder management, policy navigation, program execution, and data fluency—capabilities that can immediately bolster operations in healthcare, finance, tech, and other regulated industries.
For companies willing to act fast and think differently, this is a golden moment to secure top-tier talent. As public sector workers look to pivot, the businesses that win will be those that don’t hesitate or cling to traditional hiring models.
Lesonsky: And while we’re talking former federal workers, this goes well beyond Washington, DC, correct?
Dr. Mondragon: Actually, the vast majority of federal workers live outside of the District of Columbia, so the available pool of workers can depend quite a bit on your region. Think of the example of a park ranger who has moved to a rural area with few job opportunities. So, we feel the impact of the federal layoffs will be seen across the country.
Lesonsky: Will these federal layoffs affect unemployment rates?
Dr. Mondragon: While the share of federal workers is small when you look at the overall economy, Patrick Clapp, senior economic consultant at Chmura Economics & Analytics, estimates that for every person laid off in DC, another 1.3 could be affected. While the numbers are marginal when you look at the government jobs alone, the unemployment rate might be affected by the ripple effect on the private sector. Look no further than the General Services Administration directive for 10 major consulting firms to justify their contracts.
Lesonsky: What’s the long-term impact on the business community?
Dr. Mondragon: In early April, J.P. Morgan Research raised the probability of a recession occurring in 2025 to 60%, up from 40%. Tariff instability and government layoffs point to a softer labor market very shortly. This means the balance tips toward employers, but the smartest companies don’t use that as a license to regress. They use it as a chance to hire with purpose, elevate their brand, and build bench strength for whatever the market throws at them next.
Lesonsky: How can small businesses go about attracting this available talent?
Dr. Mondragon: To make the most of this moment, companies must move toward a skills-first approach and lean into technology to make quick and objective decisions. Business owners need to consider their job openings in terms of the skills required for the role versus looking for a person with XX number of years of experience doing the job.
Thus:
- Lead with a skills-first mindset: Government roles often come with rigid titles and non-obvious job matches. But beneath the surface, former public servants bring exceptional strengths: project management, regulatory navigation, cross-functional collaboration, data analysis, and more. A program manager in the federal government may have stronger stakeholder management skills than someone with the same title in tech. Strip away the titles—focus on the skills that match your job and what people can do.
- Use technology and automation to streamline and scale: There is a surge in applications right now, and the bigger the volume, the harder it is for companies to make sound hiring decisions using old-fashioned methods. Platforms that use structured assessments, video interviewing, and AI-driven skills evaluations can surface the most qualified candidates, without relying on proxies like where someone last worked.
Lesonsky: Any other insights you’d like to share?
Dr. Mondragon: HireVue’s 2025 Global Guide to AI in Hiring found that 52% of candidates use tools like ChatGPT to update their resumes (which could be a conservative figure). While it’s understandable that candidates are using these tools, the AI-generated nature of resumes means they are even less predictive than before. Validated skill assessments that measure job-relevant competencies are the best way to determine if someone is prepared to succeed at your organization.
Rieva Lesonsky is President of Small Business Currents, LLC, a content company focusing on small businesses and entrepreneurship. While you can still find her on Twitter @Rieva, you can also reach her @Rieva.bsky.social and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo by Marielle Ursua on Unsplash
