Current Conditions: Attitudes Lean Fair in Q2 2026
Sixteen percent of HR executives rate current employment conditions as poor or very poor in Q2 2026 — relatively unchanged since Q1 2026, although it represents a notable decline after a turbulent 2025 in which this value rose from just 7% to 22% by the end of last year. The share of executives who view conditions as good or excellent fell from 36% in Q1 2026 to 30% in Q2, while the share who view current employment conditions as fair jumped from 47% to 54% over the same period.
In Q2 2026, HR executives’ perceptions of current employment conditions have become noticeably more cautious compared to the mild optimism observed at the start of the year. While the January 2026 jobs report from the U.S. Bureau of Labor Statistics (BLS) showed signs that the labor market might be stabilizing after a lackluster performance in the latter half of 2025, subsequent data releases through March presented mixed signals regarding labor market health, with alternating months of significant losses and gains in total nonfarm employment. This uncertainty may have led to a decline in the share of HR leaders expressing optimism and a rise in those characterizing current conditions as fair, highlighting a shift toward a more guarded and pragmatic stance. However, results from the May 2026 BLS jobs report (released after the Q2 CHRO Outlook survey was fielded) suggest a potential rebound in the labor market, with consecutive months of robust nonfarm employment growth. Should this positive momentum persist, future surveys may reflect increased confidence among HR executives regarding labor market conditions.
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Employment Forecast: Caution Shapes Near-Term Expectations
HR executives’ expectations about employment conditions over the next six months worsened from Q1 2026 to Q2 2026. Most significantly, the share of executives who expected conditions to be good or excellent in the near future fell from 31% in Q1 2026 to 24%, with corresponding rises in the share of executives who anticipated fair employment conditions (+7 percentage points). The share of HR leaders who expected future employment conditions to be poor or very poor has remained relatively unchanged since Q1 2026 at 19%.
As was the case when discussing current conditions, this development may signal that HR executives are taking a more cautious view of the latest labor market developments as economic uncertainty remains high. With that said, opinions remained divided, as comments from the survey indicate:
- Positive rating: “Despite the overall economic conditions, I think employment will still be steady, especially at the lower levels and blue-collar jobs.”
- Fair rating: “Companies will continue to be cautious on adding new positions until they feel the economy will support it for the long term.”
- Negative rating: “The geopolitical situation and war with Iran, oil prices, and inflation are all contributing to the economic uncertainty. Adoption of AI may stave off some of the economic pressure for businesses, but it won't necessarily provide comfort or stability to employees.”
Budget Forecast: Total Rewards Budget Growth Expectations Decline Sharply
The proportion of HR executives who expect their organization’s total rewards budget to rise over the next six months decreased from 50% in Q1 2026 to 40% in Q2 2026. While the expectation for total rewards budgets to increase over the next six months rose by 19 percentage points between Q2 2025 and Q1 2026, the latest data could suggest a reversal of this trend as HR executives become increasingly wary of uncertain economic conditions.
Conversely, HR executives’ expectations about recruiting budgets remained relatively stable in Q2 2026, with the share expecting their organization to increase this budget over the next six months declining from 25% to 24%.
| Increase of more than 20% | Increase of 10% to 20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10% to 20% | Decrease of more than 20% | |
|---|---|---|---|---|---|---|---|
| Total Rewards Budget | 2.4% | 7.2% | 30.4% | 48.8% | 7.6% | 3.6% | 0% |
| Recruiting Budget | 2.8% | 5.5% | 15.7% | 64.6% | 7.9% | 2% | 1.6% |
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Takeaways
40%
of HR executives anticipate an increase in total rewards budgets over the next six months.
64.6%
foresee no change in recruiting budgets during the same period, while 24% expect an increase.
Compensation Trends: Salary and Wage Growth Expectations Continue to Cool in 2026 After Rebounding in 2025
After reaching 69% in Q1 2026, the share of HR executives who expect annual salaries to rise in the next six months dipped to 64% in Q2 2026. Executives’ expectations about hourly wage growth followed a similar pattern, whereas the share of HR executives expecting growth in expected cost-per-hire remained virtually unchanged since Q4 2025 at 50%, despite being characterized by high volatility at the start of 2026.
A combination of factors is likely driving this decline in salary and wage growth expectations, including rising macroeconomic uncertainty caused by recent global supply shocks and geopolitical conflicts. These challenges, such as elevated energy prices, are squeezing firms’ profitability and contributing to a low-hire, low-fire environment, where organizations are less inclined to commit to sizeable payroll increases.
| Increase of more than 20% | Increase of 10% to 20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10% to 20% | Decrease of more than 20% | |
|---|---|---|---|---|---|---|---|
| Expected Annual Salaries | 0.4% | 3.6% | 60.5% | 35.2% | 0.4% | 0% | 0% |
| Expected Hourly Wages | 0.4% | 3.6% | 53.2% | 41.5% | 1.2% | 0% | 0% |
| Expected Cost Per Hire | 1.6% | 10.8% | 37.8% | 47.8% | 2% | 0% | 0% |
HR Executives’ Expectations for eNPS Remain Volatile
In Q2 2026, just 27% of HR executives said they anticipate an increase in their Employee Net Promoter Score (eNPS) or employee engagement, a 5-percentage-point decrease compared to Q1 2026, highlighting the ongoing volatility that has persisted since Q1 2025. Meanwhile, the majority (56.6%) said they expect no change in eNPS or employee engagement in the next six months, which is consistent with prior quarters.
| Increase of more than 20% | Increase of 10% to 20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10% to 20% | Decrease of more than 20% | |
|---|---|---|---|---|---|---|---|
| eNPS/Employee Engagement | 0% | 4% | 22.6% | 56.6% | 10.2% | 4.4% | 2.2% |
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Mixed Signals About HR Executives’ Productivity Expectations
The share of HR executives who expect an increase in revenue per employee in the next six months edged down to 35% in Q2 2026, 5 percentage points lower than in Q1 2026. In the eight quarters for which we have data, this share has always hovered between 34% and 43%, with a majority of values concentrated in the 37% to 40% range.
The share of HR executives who expect overall productivity to grow in the near future has been less stable over time. For example, in the short period between Q3 2025 and Q1 2026, this share experienced a 14-percentage-point increase from 35% to 49%, though it subsequently fell by 9 percentage points to 40% in Q2 2026.
While recent data saw HR leaders expressing strong optimism regarding productivity growth — potentially due to the rapid expansion and adoption of artificial intelligence tools — this quarter reveals a shift toward a more cautious outlook. Although the widespread marketing of AI as a productivity enhancer has fueled positive sentiment recently, the growing recognition of challenges related to AI governance and effective integration into organizations may have contributed to the moderation of these expectations.
| Increase of more than 20% | Increase of 10% to 20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10% to 20% | Decrease of more than 20% | |
|---|---|---|---|---|---|---|---|
| Expected Overall Productivity | 1.2% | 9.1% | 29.5% | 48.8% | 8.3% | 3.1% | 0% |
| Expected Revenue Per Employee | 0.4% | 5.2% | 29.9% | 47.2% | 16.4% | 0.4% | 0.4% |
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Methodology
The CHRO Outlook survey is a research study conducted quarterly. The survey was fielded electronically using the SHRM Voice of Work Research Panel to U.S.-based HR executives and senior HR executives (VP+). Respondents represented organizations of all sizes across multiple industries.
| Quarter | Sample Size (n) | Fielding Dates |
|---|---|---|
| Q4 2022 | n = 241 | Dec. 1-22, 2022 |
| Q1 2023 | n = 249 | March 6-21, 2023 |
| Q2 2023 | n = 199 | June 8-15, 2023 |
| Q3 2023 | n = 536 | Aug. 30-Sept. 11, 2023 |
| Q4 2023 | n = 376 | Nov. 17-22, 2023 |
| Q1 2024 | n = 391 | Jan. 3-10, 2024 |
| Q2 2024 | n = 352 | April 15-24, 2024 |
| Q3 2024 | n = 339 | July 17-25, 2024 |
| Q4 2024 | n = 320 | Oct. 16-25, 2024 |
| Q1 2025 | n = 323 | Jan. 13-21, 2025 |
| Q2 2025 | n = 353 | April 8-20, 2025 |
| Q3 2025 | n = 307 | July 9-21, 2025 |
| Q4 2025 | n = 262 | Oct. 14-24, 2025 |
| Q1 2026 | n = 276 | Jan. 13-31, 2026 |
| Q2 2026 | n = 258 | Apr. 14-30, 2026 |
Read the Q2 2026 series:
CHRO Employment Outlook | CHRO Economic Outlook | SHRM Hiring and Retention Difficulty Indexes