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The Q2 2026 Engineering Business Sentiment report shows that engineering firms remain fundamentally strong, supported by durable backlogs, steady firm-level performance, and continued hiring expectations.
However, confidence in the broader U.S. economy weakened this quarter, creating a more cautious outlook. Firms are still planning for growth, but at a more measured pace as they navigate rising uncertainty, inflation concerns, healthcare cost increases, and continued workforce constraints.
Why This Matters
The engineering and design services industry continues to show resilience, but the operating environment is becoming more complex.
Current firm and industry sentiment remain positive, but the outlook for the U.S. economy has turned negative. At the same time, firms are adapting through greater project selectivity, cost management, and tighter operational discipline.
Key Findings
Firm Fundamentals Remain Strong
Current sentiment remains positive, with firms reporting strong confidence in their own financial performance and the engineering and design services industry overall.
Economic Confidence Has Weakened
Sentiment toward the current U.S. economy fell 26 points from last quarter to +19, while the 12-month outlook for the U.S. economy moved into negative territory at -6.
Backlogs Remain Stable
Nearly half of respondents report current backlogs of one year or more, with the median backlog holding steady at 11 months.
Hiring Expectations Remain Positive
Sixty-four percent of firms expect hiring to increase over the next 12 months, producing a net rating of +57.
Labor Constraints Are Easing Slightly
Eighty-four percent of firms still report at least one open position, but fewer firms are turning down work due to staffing shortages compared to prior periods.
Cost Pressures Are Rising
Healthcare insurance premiums are a significant concern. Sixty-seven percent of respondents are concerned or extremely concerned about premium costs, and 78 percent of firms reported an increase during their most recent renewal period.
Firms Are Becoming More Selective
Among firms that turned down work due to workforce shortages, 83 percent said they are being more selective about the projects they accept, while 60 percent are turning down less profitable work.
What This Means for Engineering Firms
The Q2 2026 results point to an industry that is still growing, but with more caution and discipline.
Firms are balancing strong demand and stable backlogs against a more uncertain economic outlook. As cost pressures rise and labor challenges persist, leaders are prioritizing higher-value work, managing capacity more deliberately, and planning for growth at a measured pace.
Bottom Line
The engineering sector remains on solid footing, but the environment is shifting.
Q2 2026 marks a move from growth driven primarily by demand and labor constraints to a more cautious phase defined by cost management, strategic selectivity, and careful expansion.
Access the Full Report
Download the full Q2 2026 Engineering Business Sentiment report to explore detailed findings on current conditions, future expectations, market sector sentiment, workforce trends, healthcare cost pressures, and executive-level outlooks across the engineering industry.