U.S. business sentiment fell to 6.02 out of 10 in the latest Principal Financial Well-Being Index, a quarterly measure of U.S. business optimism and financial health. Against a backdrop of energy and fuel price volatility, the Index is down 8% from July and ties April 2025 for the lowest recorded score since the Index began in 2021. Small and midsize businesses (SMBs) drove the decline, falling to a record low of 5.28, while large businesses held nearly steady at 7.08, marking the widest gap between the two groups since March 2021.

While more than half of business leaders (52%) say their company is growing, confidence in the broader economy continues to decline. Just 16% describe the U.S. economy as growing, and optimism around the economic outlook for the next 12 months has fallen to 40%, down 10 points from July. Concerns about U.S. economic stability, inflation, and recession risk have the greatest influence on leaders’ confidence in their own businesses’ financial outlook.

“The widening gap in sentiment between small and large businesses tells us economic pressure is not landing evenly,” said Amy Friedrich, president, Benefits and Protection, Principal®. “Small and midsize businesses are feeling the weight of higher costs and economic uncertainty most, and those challenges are shaping their outlook for business performance. Employers of all sizes are responding with practical changes to how their teams are organized and how work gets done. Those adjustments are helping them stay productive while conditions remain uncertain.”

Employers turn to upskilling, flexible talent, and AI to navigate economic uncertainty

As cost pressures persist, employers are increasingly turning to workforce development, flexible talent, and AI-powered automation. The Well-Being Index found that among the 89% of employers that made operational adjustments in 2026, 93% developed or redeployed existing employees through cross-training, upskilling, and moves into new roles. Another 72% brought in flexible or specialized talent, and 58% changed the work itself by using AI and automation.

Employers say the changes are working. Nearly all of those who adjusted how work gets done report at least one meaningful result (98%), with the majority reporting improved productivity and efficiency (51%) and more consistent, higher-quality work (41%). Employers that implemented multiple workforce and operational changes report better outcomes overall.

Employers maintain staffing and benefits despite external pressures

Even as businesses rethink their operations and look for efficiencies, their approach to staffing and benefits remains constant. Staffing levels have been stable throughout 2026. In October, 41% of employers reported maintaining staff over the last three months, while 48% increased staffing, and 14% decreased it.

Benefits follow the same pattern. Weaker sentiment has not led employers to pull back on benefits: On average across the benefits tested, 63% of employers made no changes in 2026, 8% added or expanded a benefit, and only 3% reduced or eliminated one. Looking ahead to 2027, 8% plan to add or expand benefits, compared with 1% who plan to reduce or eliminate them.

“Employers are committed to keeping their people and supporting their financial security, even as they face mounting external pressures,” said Friedrich. “Many remember how hard it was to rebuild their teams after the last economic downturn, and they don’t want to repeat that experience. Their commitment shows up in the benefits they offer, and employers continue to view those programs as important investments in their workforce.”

About Principal Financial Group®

Principal Financial Group® (Nasdaq: PFG) is a global financial company with over 19,000 employees1 passionate about improving the wealth and well-being of people and businesses. In business for 147 years, we’re helping 84 million customers1 plan, insure, invest and retire, while working to support the communities where we do business and build an inclusive workforce. Principal® is proud to be recognized as one of the 2026 World’s Most Ethical Companies2 and named as a “Best Places to Work in Money Management3.” Learn more about Principal and our commitment to building a better future at principal.com.

1 As of September 30, 2026

2 Ethisphere, 2026

3 Pensions & Investments, 2025

About the Principal Financial Well-Being Index℠

The Principal Financial Well-Being Index℠ (WBI) Wave 4 (September 14-October 4, 2026) is recurring research used to track sentiment around repeated financial health measures and timely issues relevant to businesses. Business owners, decision makers, and business leader participants who represent companies with between 2 to 10,000 employees (n=1,000) provide information by completing a 15-minute online survey. Access to sample is provided by ROI Rocket, a third-party research panel provider.​

In 2025, the WBI added a formal index. The index number in the WBI is calculated by taking responses from 6 perceptual measures evaluating current financial health, financial comparisons year over year, and future projections for business and economic outlook. The percentages of respondents who answered positively for each measure are averaged and standardized to a 0-10 scale, with perceptions of business / company, local economic, and U.S. economic growth weighted 60%, 20%, and 20% respectively within their aggregate measure. ​

Small businesses = 2–499 employees, Large businesses = 500–10,000 employees​

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Company®. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392. ©2025 Principal Financial Services, Inc.

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