Key Points

  • The Conference Board said Monday that U.S. labor market momentum is weakening, with job seekers finding opportunities increasingly scarce, while more workers are being forced into involuntary part-time rather than full-time work.
  • The organization also said the share of small businesses reporting hiring difficulties fell to 33% in July from 36% the previous month, while the ratio of temporary to permanent workers rose in July. Its Employment Trends Index fell to 107.55 in July from 108.19 in June, the lowest level since last October.
  • "Businesses have become more hesitant amid tariff and policy uncertainty," said Mitchell Barnes, an economist at The Conference Board. "But with unemployment and labor underutilization rates still low, businesses appear more inclined to pause and wait rather than step up layoffs," he said in a statement.

Deeper Analysis

The decline in The Conference Board's Employment Trends Index echoes data released by the Labor Department last Friday, which showed the labor market cooling over the past three months.

The Labor Department said employers added 73,000 jobs in July, below expectations, while job growth for June and May was revised down by a combined 258,000. The unemployment rate rose 0.1 percentage point to 4.2%.

Additionally, in a sign that finding work is becoming harder, the number of people unemployed for 27 weeks or more has exceeded 1.8 million—the highest level since 2017 (excluding the pandemic-era employment collapse).

Economists note that the Trump administration's wavering stance on tariff negotiations has prompted businesses to delay hiring and investment. Meanwhile, the government's own hiring contraction has also reduced federal jobs.

Federal Reserve Chair Jerome Powell said at a press conference on Wednesday (before the July jobs data release) that over the past several months, labor supply and demand have both declined slightly, bringing the job market into a more balanced state.

"By many, many statistical measures, the labor market remains roughly in balance," he said after the Fed noted inflation was "somewhat elevated" and held its key interest rate in the 4.25% to 4.5% range for a fifth consecutive policy meeting.

"Indicators such as the quits rate, job openings, and even the unemployment rate are, by various measures, very close to where they were a year ago," he said. "So you don't see weakness in the labor market."

At the same time, Powell said the job market warrants close attention from the central bank.

"But because it's coming into balance with both supply and demand declining, that suggests downside risks," Powell said. "So we're certainly watching it closely."

Some economists believe that employment, inflation, and other data point to an economy on the verge of weakening.

"The economy is on the brink of recession," said Mark Zandi, chief economist at Moody's, attributing it to immigration restrictions and import tariffs, which he said are eroding corporate profits and weakening household purchasing power.

"The unemployment rate is still low, but that's only because labor force growth has stalled," Zandi said on platform X. "Consumer spending has flattened, construction and manufacturing are contracting, and employment is about to decline," he said on X on Sunday (sic).

"With inflation picking up again, it's hard for the Fed to come to the rescue," Zandi said.