Sentiment from U.S. small and midsize businesses regarding the health of their business has remained steady despite increasing concerns about the economy, according to a recent survey by Principal Financial Group.

Even as recessionary pressures rise and inflation persists, the latest Principal Financial Well-Being Index found that 64% of businesses report financial improvement, compared with this time last year, and most businesses consider themselves growing or stable. Large businesses were more likely to say they are growing, at 61%, compared with 46% of small businesses. Nearly half (49%) of small businesses consider themselves stable, compared with 36% of large businesses.

Although businesses remain stable, most believe a recession is likely. Sixty-five percent of employers and 73% of employees believe it’s somewhat or very likely a recession will happen in the next six months. Both employers and employees say they are taking steps to reduce spending and increase savings.

The survey was commissioned by Principal and conducted online by Dynata July 7-20, with a total of 500 business owners, decision-makers and business leader participants and a total of 200 employee participants.

When asked about steps they will take to prepare for a recession, businesses are focusing on steps to reduce spending and increase savings:

• 35% have taken steps to reduce operational costs.
• 35% of businesses indicated an increase in prices and services.
• 31% report increasing cash reserves.

While all businesses agree they would avoid any action that would negatively affect employees, smaller businesses are the most focused on minimizing employee impact. In the face of a recession, small businesses are indicating they will not take steps to reduce salaries and benefits or lay off staff.

“Small businesses learned a lot from the 2008 recession, and many learned they can make adjustments that will minimize the impact on salaries or staff during future periods of economic stress,” said Amy Friedrich, president of U.S. Insurance Solutions at Principal. “Small businesses are dedicated to their employees. We saw that during the pandemic, and I think we’ll see the same creativity and resiliency if pressures mount in the near term.”