Despite headwinds from the Iran War, labor demand has picked up modestly across businesses, reinforcing the view of a stabilizing labor market compared to a year ago. Coupled with persistent labor cost pressures for many firms, this environment has added emphasis to AI’s potential to reshape work and act as a lever to deliver broad-based growth and transformation to employment dynamics over time.
The latest Principal Well-Being IndexSM shows that U.S. businesses are continuing to add jobs at a modest pace since the start of the year, with firms reporting a shortage in quality employees as demand for specialized talent has increased.
The expansion in hiring demand has been consistent with official labor market statistics. As layoffs remain subdued, there have been heightened concerns about employee retention, with firms noting that the majority of reasons behind staffing decreases were due to employee choice. Overall, these dynamics emphasize that the labor market has largely stabilized from its declining trend from a year ago.
With labor cost pressures remaining in focus, the sentiment towards AI is evolving more positively. Indeed, despite dour tech-industry related headlines, many businesses believe that AI is reshaping work, not eliminating it. This points to a workforce transition marked by adaptation, rising skill demands, and sustained investment in human capital. Momentum is building, marked by the significant increase in AI adoption compared to a year ago, with AI integration now becoming increasingly visible among small and medium-sized businesses.
Overall, these trends point to an improving labor market picture that is likely to be supported, rather than undermined, by increased use of AI and automation technologies.
Footnotes
The Principal Financial Well-Being Index℠ (WBI) Wave 3 (June 22–July 13, 2026) is recurring research used to track sentiment around repeated financial health measures and timely issues relevant to businesses. Business owner, decision maker, and leader participants who represent companies with 2–10,000 employees (n=1,000) provide information by completing a 15-minute online survey.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. About the Principal Financial Well-Being IndexSM
The Principal Financial Well-Being Index℠ (WBI) 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.
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