The San Joaquin Valley Business Conditions Index for July dipped to a score of 51.6, down from the June score of 55.4.
But July was the sixth straight month in which the score was above 50 -- an indicator that suggests economic expansion, reported economist Ernie Goss. A score of 50 is considered neutral.
"We are beginning to see slight improvements in the area's construction sector and businesses tied to construction," Goss said in a statement released by the university. "However, it is too early to call this a rebound."
The index compiles expectations of businesses' purchasing managers and executives for employment, wholesale prices, inventories, business confidence, imports, exports and production and sales.
Valley business officials who were asked to identify the biggest hurdles facing their companies in the coming year indicated the end of the Bush tax cuts, the weak housing sector, European economic turmoil, implementation of health care reform and lack of wage growth.
Although the hiring gauge dipped from 55.4 in June to 51.3 in July, it was only the sixth time in the last 11 months that the employment index has surpassed the neutral level.
"The area has been adding jobs at a slow and unspectacular pace for the last several months," Goss said in his report. "Our index points to a continuation of this positive trend."
Indicators of slow but steady job growth have been reported by economists in other parts of the region as well.
A report last month from California State University, Stanislaus, also stated there are gradual signs the valley economy is improving and indicated that slow, steady growth would continue for the next two years.
That likely comes as little consolation to the thousands who are out of the work throughout the region.
In Merced County alone, the unemployment rate is nearly 18 percent. Merced is the fourth-worst county in California for unemployment -- 89,000 people are employed out of a work force of 108,400, according to state data.
The region was especially hard hit when the housing market crashed and the recession hit. Jobs losses spread from the real estate and construction-related businesses to all other sectors, including government.
With the job losses came record numbers of foreclosures and evictions, further crippling the region's economy.
Still, economists say, slow and steady is a welcome improvement for the valley.
But business leaders surveyed by Goss weren't too optimistic about the future. Looking ahead at the next six months, their confidence level fell to a weak 39.5 in July, down from 45.9 the previous month -- well below the neutral mark of 50.
They are concerned about fallout from the European economic turmoil, a national economic slowdown and drought conditions nationwide.
The Fresno Bee contributed to this report.