U.S. businesses are entering 2026 with signs of renewed momentum as staffing stabilizes and economic pressures begin to ease, according to the latest Principal Financial Well-Being Index, a quarterly study of the financial health of U.S. employers.

The quarterly index, which measures business health, growth and optimism, recorded a score of 6.65 out of 10 in January, up slightly from 6.5 in October 2025. The improvement reflects stabilizing sentiment among business leaders after a year marked by cost pressures and economic uncertainty.

Large businesses appear more optimistic about the overall economic outlook, with 56% reporting confidence compared with 44% of small to mid-sized businesses. At the same time, concerns about macroeconomic conditions have eased modestly since late 2025. Business leaders report lower levels of concern about tariffs, policy unpredictability, wage inflation and the cost of raw materials.

Private sector staffing levels have also remained steady. Between October and December, 92% of employers either increased staff (47%) or maintained current levels (45%), continuing a “low-hire, low-fire” environment as companies focus on retaining specialized talent, according to the report.

Data from the report also shows the number of high-income job seekers declined by 3.2%, while the number of low-income job seekers rose by 10.15%.

“We’re seeing businesses continue to prioritize staffing as a key part of their operational strategy,” Amy Friedrich, president of benefits and protection at Principal, said in a prepared statement. “They are focused on keeping their teams intact and counting on them to leverage new technology and modernized systems to continue driving growth.”

Technology modernization is a top priority for businesses in 2026. The report found 81% of employers plan to upgrade technology, including software (54%), artificial intelligence (45%) and hardware (21%).

Those investments are also influencing financing strategies, with 42% of employers expecting to take on debt this year, including 53% of larger companies and 36% of small to mid-sized businesses. Among businesses planning to borrow, 57% will direct financing toward technology, software or automation upgrades, while over 25% plan to borrow for hiring and talent acquisition. 

More than half of businesses planning to borrow expect to do so within the next three months.

While businesses still prefer lower borrowing costs, the latest index shows urgency around key initiatives plays a larger role in borrowing decisions than rates alone. Interest rates are three times more influential when businesses consider discretionary spending than when evaluating mission-critical growth initiatives, where many companies say they are willing to move forward even at rates as high as 12%.

“Interest rates are only one part of a larger financial picture,” Friedrich said. “Often, the value gained from putting capital to work sooner can quietly outpace the value of holding out for ideal conditions. Across industries, we’re seeing organizations embrace a realistic but resilient mindset: They understand today’s borrowing environment, and they’re choosing to invest anyway because growth can’t wait.”

Past coverage: 

Iowa Economy Podcast: The confidence divide

Principal index at third-lowest point since 2021