Conference Board Says Easier Hiring Signals Upcoming Labor Market Weakness

Conference Board's May ETI Signals Potential Labor Market Weakness

The U.S. labor market continues to show resilience on the surface, but beneath the headline numbers, warning signs are beginning to emerge. According to a Monday, June 8 press release from The Conference Board, its Employment Trends Index (ETI) declined in May, pointing to potential softening in employment conditions in the months ahead. While a single month's dip does not confirm a downturn, economists and business leaders are paying close attention to the underlying signals this index is sending.

What Is the Employment Trends Index?

The Employment Trends Index is a forward-looking composite measure designed to forecast changes in payroll employment before they show up in official jobs reports. Unlike lagging indicators that reflect what has already happened in the economy, the ETI aggregates eight separate labor market components to give researchers and policymakers an early read on where hiring is heading. Because of this predictive quality, a sustained decline in the ETI is often interpreted as a reliable warning that job losses or hiring slowdowns may be on the horizon.

The index is produced monthly by The Conference Board, a nonpartisan business research organization that provides economic analysis and insights to help leaders navigate complex environments. Its ETI is widely watched by economists, HR professionals, and financial markets as a credible gauge of near-term labor market direction.

May's ETI Drop: Key Numbers to Know

In May 2025, the ETI declined from an upwardly revised reading of 107.88 in April to 107.1. While this drop of less than one point may appear modest, the significance lies in what is driving it. According to the release, five of the index's eight components contributed negatively to the overall reading in May — a majority share that signals broad-based, rather than isolated, softening in labor market conditions.

Jannik Schulz, economic research associate at The Conference Board, offered important context in the release: "May's payroll employment was strong, rising by 172,000 in the month. However, the ETI, a forward-looking measure for payrolls, ticked down slightly in May with five of eight components contributing negatively to the index, highlighting potential downside risks to the labor market. Nevertheless, the ETI is up 2.1 points compared to six months ago, indicating continued resilience in the labor market."

That six-month comparison is a reminder that a single month of decline should be weighed against the broader trend. Still, the breadth of negative contributions warrants attention from employers and workforce planners alike.

What Is Driving the Decline?

The primary driver of May's ETI decrease was a notable drop in the share of small firms reporting that jobs are "not able to be filled right now." This metric, which serves as a proxy for labor tightness, fell from 34% in April to 29% in May — a significant five-percentage-point shift in just one month. When fewer small businesses are reporting unfillable positions, it generally indicates that the labor supply-demand balance is shifting, with employers finding it easier to hire. While easier hiring can seem like good news for job seekers, from a macroeconomic standpoint, it often signals that demand for labor is cooling.

Beyond this leading indicator, four other components also weighed on the index in May:

• Job openings: A jump in open positions was noted, but The Conference Board characterized it as idiosyncratic — meaning it was driven by unusual or one-off factors — and not expected to persist into subsequent months.
• Initial unemployment claims: An increase in the number of Americans filing first-time claims for unemployment insurance added downward pressure to the index, reflecting some degree of job displacement occurring in the economy.
• Real manufacturing and trade sales: A slight negative movement in this component suggests that demand in the goods-producing sector may be moderating, which can have downstream effects on hiring in manufacturing and related industries.
• Industrial production: Similarly, a small decline in industrial output contributed negatively, reflecting softer conditions in the production side of the economy.

The report noted that these negative contributions were partially offset by positive movements in the remaining components, preventing a sharper overall decline in the index.

What This Means for Employers and Workers

For businesses, the May ETI data reinforces the importance of workforce planning that accounts for shifting labor market dynamics. The easing in hiring difficulty reported by small firms could open a window for companies that have struggled to fill critical roles. At the same time, the increase in unemployment claims is a signal that layoffs or reductions in hours may be quietly rising in certain sectors.

For workers, the data presents a mixed picture. Strong payroll growth of 172,000 in May shows that the economy is still generating jobs at a healthy pace. However, the forward-looking components of the ETI suggest that this pace may not be sustained through the latter half of 2025. Job seekers would be wise to remain proactive and not assume that the current hiring environment will remain equally favorable in coming months.

The Bigger Picture: Resilience With Caution

It is critical to avoid overreading a single month's index movement. As Schulz noted, the ETI remains 2.1 points higher than it was six months ago, reflecting underlying strength in the U.S. labor market that has persisted through multiple economic headwinds. Interest rate pressures, global trade uncertainty, and shifting consumer spending patterns have all tested the labor market in recent quarters, yet employment has remained broadly stable.

That said, the May ETI reading is a timely reminder that resilience is not immunity. When a majority of an index's components point in the same negative direction — even modestly — it is worth treating as an early-warning signal rather than noise. The Conference Board's role is precisely to surface these kinds of forward-looking insights before they become visible in lagging data like monthly unemployment rates.

Looking Ahead

All eyes will be on June's ETI reading to determine whether May's dip was a brief pause or the beginning of a more sustained downward trend. Key factors to watch include whether the unusual spike in job openings normalizes as expected, whether initial unemployment claims continue to rise, and whether small business hiring sentiment recovers or continues to ease. Policymakers at the Federal Reserve will also be monitoring these signals closely as they weigh decisions about interest rate policy in the second half of 2025.

For now, the U.S. labor market remains on solid footing — but the May ETI is a clear signal that the road ahead may require more caution than the headline payroll numbers alone would suggest.