Small business confidence now splits between a firm’s own books and a weaker economy, and that split should shape year-end pricing, hiring, and credit choices. Gusto’s 2026 State of Small Business report, out November 12, 2026, finds 61% of owners optimistic about their company and only 18% about the U.S. economy. A day earlier, Principal’s Well-Being Index put small and midsize sentiment at a record-low 5.28 out of 10, while 52% still said their own business is growing.
Updated November 12, 2026
Key Takeaways
- Gusto: 61% optimistic about their firm, only 18% about the economy.
- Principal’s small-business score hit a record low of 5.28 versus 7.08 for large firms.
- Two-thirds of Gusto firms use AI; 5% built it in wherever the technology allows.
- Of Gusto firms using outside financing, 79% relied on a business credit card.
How wide is the small business confidence gap?
Gusto surveyed 1,731 owners with fewer than 25 employees from August 17 to September 7, 2026, all Gusto customers weighted by industry and firm age. Principal surveyed 1,000 leaders from September 14 to October 4 at firms of 2 to 10,000 employees. Small businesses there are 2 to 499 employees. The questions are not identical.
Own-firm optimism is unchanged at 61%. Optimism about the U.S. economy fell from 29% in 2025 to 18%, and pessimism rose from 50% to 59%. Eighty-six percent say the business meets or exceeds the expectations they had when they started.
In Principal’s November 11 release, the overall score fell 8% from July to 6.02, tying April 2025 for the lowest recorded score since the index began in 2021. Twelve-month economic optimism fell 10 points, to 40%. Large firms held nearly steady at 7.08, and Principal calls the 1.8-point gap with small firms the widest since measurement began.
| Source | Own business | U.S. economy |
|---|---|---|
| Gusto, under 25 employees | 61% optimistic | 18% optimistic; 59% pessimistic |
| Principal leaders | 52% say the company is growing | 16% say the economy is growing |
Among optimistic owners, 68% point to customer spending and demand. Nich Tremper, Senior Economist and Head of Gusto Insights, said: “What keeps owners confident is that their customers are still spending. If that spending slips, their confidence may falter too.”
Is AI use still too shallow to change staffing?
Gusto finds 67% of these firms use AI, but depth is thin. Nineteen percent are experimenting, 28% use AI for at least some tasks, 15% use it regularly across multiple functions, and 5% have it built into every part of the business where the technology allows.
Among the 89% of Principal employers that adjusted operations in 2026, 58% changed the work itself by using AI and automation, and 93% developed or redeployed existing employees. As analysis, that is a case for training, not a hiring freeze, the same limit described in why the AI productivity gap still misses teams.
Why are credit cards carrying the financing load?
Among Gusto firms that used outside financing, 79% relied on a business credit card, up from 69% in 2025. Sixty-three percent of those card users do not pay the balance off each month, which suggests longer-term financing. About 35% of all small businesses used no outside financing. Forty percent say rising interest rates have hurt.
Tremper said: “Small businesses continue to face high borrowing costs, and that may continue into 2027.” Owners comparing a bank line can also weigh tighter small-business lending standards.
What should owners weigh before year-end?
Fifty-nine percent of Gusto owners say changing input prices hurt over the past year, against 3% who say the effect was positive. Fifty-two percent of owners raised prices over the past 12 months, most often by up to 10%, and another 50% plan to raise them again next year.
Twenty-six percent of Gusto owners tried to hire and struggled to find qualified people they could afford. Among them, 64% said candidates lacked the skills the job required. In Principal’s October reading, 41% of employers maintained staff over the last three months, 48% increased staffing, and 14% decreased it.
Across benefits tested, only 3% reduced or eliminated one in 2026, and 1% plan to do so in 2027. Amy Friedrich, president, Benefits and Protection, Principal, said: “Many remember how hard it was to rebuild their teams after the last economic downturn, and they don’t want to repeat that experience.”
As analysis, three checks follow.
- Confirm demand before a second price increase.
- Treat unpaid card balances as financing, not a float.
- Build skills on the current team before adding a role.
Frequently asked questions
How wide is the gap between views of the firm and the economy?
Gusto finds 61% optimistic about their own business and 18% about the U.S. economy. Principal finds 52% say their company is growing and 16% say the U.S. economy is growing.
How deeply are small businesses using AI?
Sixty-seven percent use AI, but 19% are experimenting and only 5% have built it into every part of the business where the technology allows.
How dependent are small firms on credit-card financing?
Among Gusto firms using outside financing, 79% relied on a business credit card, up from 69% in 2025. Sixty-three percent of those users do not pay the balance off monthly.
Are employers cutting staff or benefits?
Principal’s October reading showed 41% of employers maintaining staff, 48% increasing it, and 14% decreasing it. Only 3% reduced or eliminated a tested benefit in 2026.
