Principal Index: 4-Year Low Confidence
- The Principal Financial Well-Being Index has fallen to 6.02, a significant drop from 7.8 in November, marking its lowest level as November 2020. The index, which gauges confidence...
- While the decline mirrors economic conditions seen during COVID-19, a key difference is that employers are prioritizing staff retention over layoffs.
- the small-to-midsized business index, assessing financial health, year-over-year comparisons, and future outlook, experienced a record 14% drop, from 7.38 to 5.69.
The Principal Financial well-Being Index reveals a considerable downturn, hitting its lowest point since 2020. Small and medium-sized businesses express growing pessimism,driven by economic inflation,healthcare expenses,and recessionary fears—the primarykeyword.Yet, amid these challenges, most firms avoid layoffs, focusing on operational efficiencies. This data, sourced for News Directory 3, indicates a shift toward stability, impacting the secondarykeyword on Main Street. Discover what’s next for these cautious optimists as they navigate uncertain economic waters.
Principal Well-Being Index Plummets Amid Economic Uncertainty
Updated June 7, 2025
The Principal Financial Well-Being Index has fallen to 6.02, a significant drop from 7.8 in November, marking its lowest level as November 2020. The index, which gauges confidence in business health on a scale of 0 to 10, reflects the sentiments of business owners, leaders, and decision-makers surveyed by Principal.
While the decline mirrors economic conditions seen during COVID-19, a key difference is that employers are prioritizing staff retention over layoffs. Only 16% of employers believe the U.S. economy is growing, a 24-point decrease since June 2024. However, most remain cautiously optimistic about their own business performance, with 56% reporting growth. concerns about economic inflation are weighing heavily on small to mid-sized businesses.
the small-to-midsized business index, assessing financial health, year-over-year comparisons, and future outlook, experienced a record 14% drop, from 7.38 to 5.69. This indicates that macroeconomic uncertainty is increasingly influencing decisions on Main Street, even for businesses historically insulated from broader economic shifts.
More than half of SMBs describe the U.S. economy as declining (49%) or struggling (5%). Their top concerns include health care costs (58%), economic inflation (55%), U.S. economic stability (55%), and the possibility of a recession (49%). This has dampened optimism, with only 36% of SMBs expressing optimism about the coming year, a sharp contrast to 59% in November 2024.
“uncertainty is pulling business owners out of a growth mindset and into stability mode,” said Amy Friedrich, president of Benefits and Protection at Principal. “after months of delays and mixed signals, what this market craves is certainty. Clear, sensible moves on tax and trade policy will give main Street the confidence to move forward.”
Despite these challenges, 90% of businesses report maintaining or growing their workforce. Instead of layoffs, they are focusing on operational efficiency. About 18% are implementing cost-control measures, while 13% are making targeted staffing adjustments thru selective hiring, reorganization, or enhanced retention efforts. Others are adjusting supply chain strategies to address ongoing logistical and materials challenges.
“Businesses haven’t forgotten the hard lessons of the pandemic era,” Friedrich said. ”They’re doing everything they can to preserve staffing, benefits and wages as they remember just how difficult it was to attract and retain talent as they began to ramp up their growth after the last economic downturn.”
Rising health care costs (58%) and providing employee benefits (51%) remain major concerns for business decision-makers. Additionally, 95% of employers are affected by inventory or supply chain disruptions. In response, many are cutting non-essential spending, reducing overhead, and streamlining processes to manage costs without impacting their workforce or customer experience.
What’s next
Businesses will likely continue to prioritize operational efficiency and cost management while seeking greater economic certainty through clear policy decisions on tax and trade.