Decoding the U.S. CB Employment Trends Index: Sector Rotation in a Shifting Labor Market

The U.S. Conference Board Employment Trends Index (ETI) has long served as a barometer for the labor market's underlying health. In June 2025, the index held steady at 107.83, masking a mixed reality: while job openings and manufacturing sales dipped, firms reported difficulty filling positions, and involuntary part-time work declined. This duality—stability in headline metrics versus fragility in underemployment—has become a defining feature of the post-pandemic economy. For investors, the ETI's signals are not just about employment trends but about how to reposition portfolios in a landscape where labor market contradictions drive sector rotation.

The ETI as a Sector Rotation Compass

The ETI aggregates eight indicators, from job openings to consumer confidence, to filter noise and highlight trends. When the index stabilizes, as it did in June 2025, it suggests a labor market in transition. However, the broader U-6 unemployment rate, which rose to 8.3% in July 2025 (surpassing expectations of 7.8%), reveals a deeper story. This measure, which includes part-time workers and discouraged laborers, historically correlates with sector performance. From 2014 to 2024, when U-6 declined by more than 0.5% quarter-over-quarter, sectors tied to infrastructure and energy outperformed the S&P 500 by an average of 12% annually. The current U-6 rate, though elevated, hints at a tightening labor market poised to favor these sectors.

Energy and Building Materials: Winners in a Tightening Labor Market

Infrastructure spending and OPEC+ supply discipline are creating tailwinds for energy and construction. The Bipartisan Infrastructure Law's $550 billion investment has already spurred a 30% surge in construction permits, mirroring historical patterns. Energy stocks, particularly integrated oil and midstream players, are better positioned to withstand volatility than high-debt upstream producers. For example, Chevron's diversified operations and strong cash flow make it a defensive play in an uncertain environment.

Consumer Staples: A Sector Under Pressure

Conversely, the Consumer Staples sector faces headwinds. As the U-6 rate tightens, households shift spending from essentials to discretionary goods. From 2014 to 2024, the sector underperformed the S&P 500 by 3% annually during U-6 declines. In 2024, the sector lost 13.9% of its value against the S&P 500's 1.9% loss, exacerbated by tariffs and e-commerce disruption. Procter & Gamble's recent earnings report, showing flat revenue growth amid rising input costs, underscores the sector's vulnerability.

Strategic Reallocations: Balancing Growth and Defense

Investors must navigate this duality by aligning portfolios with the labor market's shifting dynamics. Overweighting sectors like energy and building materials (15–20% of a portfolio) while trimming exposure to consumer staples is prudent. Defensive allocations should focus on utilities and healthcare, which remain resilient despite the U-6's rise.

Monitoring the Signals: The Role of the ETI

The ETI's stability and the U-6's trajectory should guide timing. A sustained decline in U-6 below 8% would likely accelerate outperformance in construction and energy. Conversely, a reversal in labor force participation (currently at 62.2%) could signal a need to rebalance.

Conclusion: Aligning with the Labor Market's Pulse

The U.S. labor market is no longer defined by simple cyclical patterns. The ETI's insights, combined with the U-6's broader view, reveal a landscape where infrastructure and energy sectors thrive while consumer staples struggle. For investors, the key is to act decisively: favor sectors with pricing power and capital intensity, and avoid overexposure to defensive plays in a low-U-6 environment. By leveraging the ETI's signals, portfolios can transform macroeconomic shifts into strategic advantages.