Decoding Sector Rotation: How the U.S. CB Employment Trends Index Shapes Equity and Real Estate Allocations

The U.S. Conference Board Employment Trends Index™ (ETI) has long served as a barometer for labor market health, aggregating eight leading indicators to predict shifts in employment trends. In July 2025, the index fell to 107.55, its lowest level since October 2024, signaling a nuanced labor market where resilience in sectors like healthcare and industrial production contrasts with caution in hiring for construction and manufacturing. For investors, this divergence offers a roadmap for sector rotation strategies, particularly in equity and real estate allocations.

The ETI's Mixed Signals and Sectoral Implications

The ETI's July decline was driven by four components: the percentage of consumers reporting “jobs are hard to get,” the share of firms with unfilled positions, temporary help employment, and the involuntary part-time worker ratio. These metrics point to a labor market where hiring is slowing in cyclical sectors. Conversely, job openings, initial unemployment claims, and industrial production showed resilience, suggesting that certain industries remain robust.

Historically, sectors with high cyclical sensitivity—such as construction, durable goods manufacturing, and specialty trade contractors—tend to react more sharply to ETI fluctuations. For example, during the 2022–2024 tightening cycle, these sectors saw job gains fall below pre-pandemic averages. Meanwhile, least cyclical sectors like healthcare and government employment outperformed, with healthcare adding 1.14 million jobs (15.2% growth) from 2023 to 2033, per the Bureau of Labor Statistics (BLS).

Equity Allocation: Rotating Toward Resilience

The ETI's mixed signals suggest a strategic shift in equity portfolios. Cyclical sectors, which historically drive economic growth, are now showing signs of fatigue. For instance, the construction sector's 4.7% projected employment growth (adding 380,000 jobs) is tied to infrastructure projects like EV charging networks and renewable energy facilities. However, with the ETI signaling caution, investors may want to reduce exposure to pure-play construction stocks and instead focus on firms with diversified revenue streams.

Conversely, healthcare and industrial production remain strongholds. The healthcare sector's demand for advanced facilities—such as medical office buildings and senior care centers—aligns with its projected 10.0% employment growth. Equities in healthcare REITs or companies like UnitedHealth Group (UNH) or Tenet Healthcare (THC) could benefit from this trend. Similarly, industrial production's resilience, driven by semiconductor and battery manufacturing, supports investments in industrial REITs or companies like Prologis (PLD), which specialize in high-tech logistics hubs.

Real Estate Allocations: Aligning with Employment Trends

Real estate investors must also adapt to sector-specific employment dynamics. The BLS projects that healthcare-related real estate will see sustained demand, particularly in senior care and long-term facilities. For example, the aging U.S. population is driving a 15.2% growth in healthcare support roles, necessitating new infrastructure. Investors should prioritize properties in suburban areas with aging demographics, where demand for assisted living and medical offices is rising.

In contrast, industrial real estate tied to advanced manufacturing—such as semiconductor fabrication plants or EV battery facilities—offers long-term potential. These projects require large, high-tech spaces, creating opportunities for developers with expertise in specialized infrastructure. Meanwhile, commercial real estate linked to construction (e.g., office spaces for engineering firms) may face headwinds as hiring slows.

Navigating the ETI's Predictive Power

The ETI's role as a leading indicator becomes critical for timing sector rotations. When the index declines, as it did in July 2025, it often precedes a moderation in employment growth. Investors should monitor components like job openings and initial claims for early signals. For example, the 275,000 drop in job openings in June 2025 (a 4% decline from January levels) suggests that hiring in cyclical sectors may contract further, reinforcing the case for rotating into healthcare and industrial real estate.

Conversely, a rising ETI could signal renewed strength in construction and manufacturing, prompting a rebalancing toward cyclical equities and commercial real estate. However, given the current policy uncertainties (e.g., tariffs, interest rates), a cautious approach is warranted.

Conclusion: Strategic Rotation in a Mixed Labor Market

The U.S. labor market in 2025 is a study in contrasts: healthcare and industrial production show resilience, while construction and manufacturing face headwinds. For investors, the ETI provides a framework to navigate these dynamics. By rotating into sectors with strong employment fundamentals—such as healthcare and advanced manufacturing—and avoiding overexposure to cyclical industries, equity and real estate portfolios can better weather macroeconomic volatility.

As the ETI continues to signal mixed trends, the key to successful investing lies in aligning allocations with the sectors that are best positioned to thrive in a slowing but still stable labor market. The future belongs to those who adapt their strategies to the evolving employment landscape.