June 03, 2026
CEO Confidence Tumbled in Q2: What This Means for Psychological Safety at Work
CEO confidence in the US economy fell sharply in Q2 2026, reversing the optimism that had built among business leaders in the previous quarter. According to a Conference Board survey of 141 CEOs from large US firms, conducted in collaboration with The Business Council, confidence dropped to 47 in Q2 from 59 in Q1.
The scale of the shift is dramatic. Fourty-seven per cent of CEOs said economic conditions had worsened, up from just 8% the previous quarter. A further 40% expected conditions to deteriorate over the next six months, compared with 13% in Q1.
That pessimism is already feeding into workforce plans. 31% of CEOs expect to reduce headcount, up from 27% in Q1 – now edging above the 28% who expect to grow their teams, down from 31%.
In a complex and fast-changing economic climate, it is understandable that CEO sentiment shifts. But when the mood at the top swings so significantly – as it has in the first half of 2026 – it raises an important question about internal communication.
How honest should CEOs be with their people? And how can organisations maintain trust and psychological safety when leaders feel pessimistic about the future?
Trust Doesn’t Come from Honesty Alone
The pandemic prompted many leaders to show greater vulnerability, acknowledge uncertainty, and be more transparent about organisational health. But as economic and geopolitical instability became a permanent operating reality, a number of leaders have shifted their tone again – becoming more guarded and filtered with top-down messaging. The result, in some cases, is a growing disconnect.
According to Axios HQ research, while 80% of leaders think their internal communications are helpful, relevant, and appropriately contextualised, only 53% of employees agree with them.
Nick Court, CEO and Founder of People Experience Hub, cautions against this over-filtered approach: “Projecting stability isn’t the answer, especially if it drifts away from reality, and that reality is being felt by your people.”
“In my experience as a CEO and working across multiple fast-moving industries, employees are more resilient to uncertainty than we often assume, particularly when communication is open and honest.”
Transparency alone is not enough to maintain trust, though. Leaders also need to provide clarity on what a difficult situation actually means for employees day to day. When confidence dips, people want to know: what is changing? Is my job safe? Is my team at risk? If those questions are left unanswered, employees will “fill in the gaps” – and that, Court says, is when trust breaks down.
“The organisations that hold trust best during uncertainty and change are the ones that take changing conditions and turn them into something people can understand and act on,” he says.
Handling Potential Layoffs with Psychological Safety in Mind
The need for clarity becomes especially important when layoffs are on the table.
As Helen Sanderson, author of ‘Psychological Safety in Practice‘, notes: “How a leader handles the stage before the decision about layoffs is made is what shapes psychological safety.”
“It is the shared sense that it remains safe to speak honestly, to ask a real question and to raise a problem without being punished or left exposed.”
When dealing with potential layoffs, Sanderson identifies three ways a CEO can respond – each of which sends a distinct message to employees about whether they matter.
Presenting transparency
Sharing the news that job cuts are possible while the decision is still open is one typical approach. While it presents as honesty, it spreads fear and puts employees in self-protection mode.
People withdraw as they brace for bad news. “What people take from it is that their need for something they can act on was not really considered,” says Sanderson.
Staying silent
The second option is for CEOs to stay quiet about potential layoffs – and perhaps even to offer reassurance that jobs are safe. This means when the job cuts do arrive, people feel like they’ve been lied to.
Sanderson says this is an even deeper harm because it leaves employees believing what they are told is not true. Psychological safety evaporates in this scenario: “The message to employees here is that they did not matter enough to be told the truth”.
Offering clarity
The third, and most effective, approach centres on clarity, which Sanderson argues is foundational to psychological safety. Specifically, clarity needs to be given about what decisions are still being explored, how those decisions will be made, and how people will be involved as that unfolds.
“Being given clear information tells people they matter enough to be kept informed and brought in,” she says. “It treats people as able to handle the truth and to take part in working it through.”
When CEOs stay silent or offer honesty without relevant context, employees withdraw both their voice and their effort. Clarity about difficult decisions, by contrast, enables people to keep asking questions, voicing concerns, and contributing meaningfully to the business.
“Psychological safety holds when people are trusted to be part of how a hard decision gets made, rather than only told once it is done,” Sanderson concludes.
What This Means for Leaders
CEO confidence will naturally shift in today’s volatile reality; as Court notes: “That’s part of the job.”
What is less variable – and more within leaders’ control – is how they communicate when conditions are hard. CEOs often lean towards filtering difficult news, while communications leaders tend to favour candour.
From a psychological safety perspective, honesty without clarity does more harm than good for both the organisation and its people.
As confidence at the top tumbles, CEOs need to provide informed, context-rich communication that lets employees understand what is happening and what it means for them. The knock-on effect on trust, discretionary effort, and employee voice can be significant – and will protect the organisation’s capacity to perform when it matters most.
