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Businesses are holding steady and prioritizing employees as they prepare for a potential recession.

As inflation and a potential recession dominate the news, we’re starting to see small shifts in business optimism. They’re on alert about health care costs, operating expenses, and more. But they also continue to report growth and stability overall.

The latest Principal Financial Well-Being IndexSM reflects growing concerns about the United States economy and reveals what businesses are doing now to protect their financials and their employees through the months ahead.1

Here’s a snapshot from each of the five trends in this wave—or view the full set of insights (PDF):

1. Businesses have remained stable as economic concerns rise.

Sentiment from small and midsized businesses regarding the health of their business remains steady despite growing economic pressures.

Graphic showing that 49% of small business think thir financial health is stable and 46% think they're growing, and 36% of large businesses thinkg they're stable and 61% think they're growing.

Graphic showing that the top three concerns for business and employees are economic inflaction, potential upcoming recession, and the cost of health care.

2. Businesses prioritize employees as they prepare for a possible recession.

The majority of businesses are expecting a recession in the next six months.

Graphic showing that 65% of businesses say a recession is somewhat or very likely.

They’re already taking steps to reduce operating expenses and increase cash reserves. But not at the sacrifice of employees.

Graphic showing that in the face of recession many businesses say the will not reduce salaries, lay off staff, or reduce benefits offered.

3. Businesses reimagine the future of work in response to burnout.

Burnout is on the rise.

Graphic showing that 61% of employers and 41% of employees are feeling more stressed compared to a year ago.

Businesses are considering ways to mitigate it. Take time off structures, for instance (traditional leave with vacation and sick days vs. banked paid time off vs. unlimited flexible time off):

Graphic showing that 81% of employers believe their time off structure is effective at reducing burnout, and 52% of employees believe the same.

4. Businesses prioritize benefits to improve the employee experience.

Increasing benefits continues to help businesses attract and retain talent—while also working to combat burnout.

Graphic showing that the top three benefits employers expect to increase are flexible schedules, the option to work remotely, and training and education opportunities.

5. Businesses are ready to invest in innovation and digital upskilling.

Jobs are becoming more complex. In order to stay relevant, employees recognize that they need to learn new skills.

Graphic showing that 73% of employees are interested in learning new skillsets to improve their performance for their current role compared to 63% who want to grow into a different role.

Graphic showing that 59% of employers say their employees have a moderate to significant gap in digital skills and 57% of employees agree.

As the economy continues to shift in the months ahead, we expect to see corresponding shifts in business growth and stability. But staying nimble, optimizing expenses, and prioritizing employee experiences and benefits—as businesses show to be doing—may help. Stay tuned for the final wave of the 2022 Principal Financial Well-Being IndexSM this winter.

 

What’s next?

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

1 The Principal Financial Well-Being Index (July 7–20, 2022) surveyed 500 business owners, decision makers, and leaders at companies with 2–10,000 employees. Businesses must offer at least health insurance or retirement benefits. This wave also included input from 200 full-time employees, surveyed July 7–18, 2022.

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