Current Conditions: Uptick in Attitudes for 2026
17% of HR executives rated current employment conditions as poor or very poor in Q1 2026 — a notable decline after a turbulent 2025 in which this value rose from just 7% to 22% by the end of the year. The share of executives who view current employment conditions as fair also declined slightly from the end of 2025, while the share who view conditions as good or excellent jumped to 36%.
Improved executive attitudes to start the year align with the January 2026 jobs report from the U.S. Bureau of Labor Statistics (BLS), which showed signs that the labor market might be stabilizing after a lackluster performance in the latter half of 2025. However, there is still significant uncertainty, and executives’ attitudes continue to be downbeat relative to those reported for most prior quarters. Furthermore, results from the February 2026 BLS jobs report (released after the Q1 2026 CHRO Outlook survey was fielded) suggest that labor market conditions continue to soften, a development that — if sustained — will likely result in a renewed deterioration in HR executives’ attitudes in future surveys.
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Employment Forecast: Expectations About Future Employment Conditions Improve Slightly
HR executives’ expectations about employment conditions over the next six months improved from Q4 2025 to Q1 2026, albeit only very slightly. Most significantly, the share of executives who expect conditions to be poor or very poor in the near future fell from 24% in Q4 2025 to 18%, with corresponding rises in the shares of executives who expect fair conditions (+2 percentage points) or good or excellent conditions (+4 percentage points).
As was the case when discussing current conditions, this development may signal that HR executives believe that the labor market is stabilizing. However, uncertainty remains high and opinions are divided, as comments from the survey indicate:
- Positive rating: “Good economy leading to better employment opportunities.”
- Fair rating: “I think things have steadied some and there won’t be much movement good or bad.”
- Negative rating: “Companies were doing major layoffs in 2026. Seems there is hesitation to grow with so much uncertainty.”
Budget Forecast: Total Rewards Budget Growth Expectations Rise Again
The proportion of HR executives who expect their organizations’ total rewards budget to rise over the next six months increased from 44% in Q4 2025 to 50% in Q1 2026. This share has increased by 19 percentage points since Q2 2025, though its current level is about average for the period under study.
HR executives’ expectations about recruiting budgets also improved in Q1 2026, with the share expecting their organizations to increase this budget over the next six months rising from 17% to 25%. While this is the highest value recorded since Q1 2025, the percentages have fallen and risen repeatedly from quarter to quarter over the last year or so, suggesting uncertainty among HR executives about economic conditions.
| 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 | 1.8% | 13.5% | 34.3% | 37.6% | 6.6% | 5.1% | 1.1% |
| Recruiting Budget | 1.5% | 3.7% | 20% | 62.6% | 7.4% | 3.3% | 1.5% |
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Takeaways
50%
of HR executives anticipate an increase in total rewards budgets over the next six months.
62.6%
foresee no change in recruiting budgets during the same period, while 25% expect an increase.
Compensation Trends: Salary and Wage Growth Expectations Cool Slightly After Rebounding in 2025
After rising from just 56% in Q2 2025 to 73% in Q4 2025, the share of HR executives who expect annual salaries to rise in the next six months dipped slightly to 69% in Q1 2026. Executives’ expectations about hourly wage growth followed a similar pattern, whereas the share of HR executives expecting growth in cost-per-hire fell more substantially between Q4 2025 and Q1 2026 (from 50% to 43%).
The patterns observed here are at least partially due to the fact that wage and salary growth expectations fell sharply in Q2 2025 due to sudden and severe changes in economic policy (especially relating to trade) that briefly panicked markets and dramatically increased concerns about an imminent recession. As those fears subsided, HR executives’ expectations gradually returned to where they were prior to the shock. Having mostly reached those pre-shock levels by Q4 2025, the mild decline observed in Q1 2026 may simply reflect a stabilization in beliefs.
| 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% | 3.3% | 66.2% | 28.7% | 1.8% | 0% | 0% |
| Expected Hourly Wages | 0.4% | 3.3% | 59.6% | 36% | 0.7% | 0% | 0% |
| Expected Cost Per Hire | 0.7% | 8.5% | 34.1% | 51.5% | 4.1% | 1.1% | 0% |
HR Executives’ Expectations for eNPS Rise for Second Consecutive Quarter
In Q1 2026, nearly 1 in 3 HR executives (32%) said they anticipate an increase in their employee net promoter score (eNPS) or employee engagement, a 4-percentage-point increase compared to Q4 2025 and a 7-percentage-point gain compared to Q3 2025. Meanwhile, the majority (55.9%) 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% | 4.2% | 27.7% | 55.9% | 8.4% | 3.4% | 0.4% |
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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 ticked up to 40% in Q1 2026, three percentage points higher than its Q4 2025 level. In the seven quarters for which we have data, this share has always hovered between 34% and 43%, with a majority of the 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, including a 14-percentage-point rise between Q3 2025 and Q1 2026. This share’s current value (49%) is the highest on record.
We cannot definitively identify why HR executives’ optimism about productivity growth has been so strong recently, but it seems plausible that the rapid expansion and adoption of AI tools has played some role, even if that role has not manifested itself as observable productivity gains yet. Certainly, artificial intelligence tools have consistently been marketed as enhancing productivity, and studies projecting future productivity growth stemming from AI — including a September 2025 Penn Wharton Budget Model report — have often suggested striking gains.
| 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 | 0.7% | 11.4% | 36.8% | 38.6% | 9.2% | 3.3% | 0% |
| Expected Revenue Per Employee | 1.2% | 3.7% | 34.7% | 50.8% | 8.3% | 0.8% | 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 |
Read the Q1 2026 series:
CHRO Employment Outlook | CHRO Economic Outlook | SHRM Hiring and Retention Difficulty Indexes