Morning Consult’s Unemployment Index Hints at Thawing Labor Market

Falling unemployment index suggests employers are holding onto their workers in early 2025

In the first week of data from 2025, Morning Consult’s Unemployment Index fell to 95.1, its lowest level since the week of January 20th, 2024. This most recent level has almost entirely reversed the tendency toward more elevated unemployment observed over the past year–a major contributing factor to the Federal Reserve’s decisions to cut interest rates in September, November and December.

At the start of 2024, the Bureau of Labor Statistics’ (BLS) unemployment rate was 3.7%, compared with the most recent reading of 4.2% for November. The most recent data from Morning Consult’s weekly index does not necessarily indicate that the BLS’ upcoming report on the December unemployment rate will show a similar reversion to early 2024 joblessness levels. Conversely, most expect to see that the government’s measure of unemployment held steady at 4.2% last month. Morning Consult’s December index value during the week corresponding with the government’s reference week was 98.9, a slight decline from the November period but several points higher than the reading for the most recent week. This dynamic more likely points to a potential downside surprise for December unemployment per the BLS but not a dramatic drop. 

Morning Consult’s unemployment data is not seasonally adjusted, and has consistently shown a drop in early January in years’ past. This pattern leaves open the possibility of some seasonally-driven bounceback in the coming weeks. Nevertheless, the downward trend in the unemployment index has persisted relatively steadily since September 2024, sending a fairly strong signal that joblessness is not picking up. Weekly unemployment insurance claims further support the notion that firms are holding onto workers heading into 2025, with initial claims for the most recent week hitting their lowest level since February of last year. 

Worker mobility remains in a deep freeze this winter

While indications of falling unemployment point to strengthening labor demand, official data on hiring continued to be bleak through late 2024. The BLS reported that the hiring rate fell to 3.3% in November, matching its lowest level since April 2020. Separations also fell, in large part driven by a quits rate that also hit its lowest level since the early months of the pandemic. Fewer workers quitting their jobs is often interpreted as a sign of diminished confidence in the ability to find better opportunities elsewhere. The wage growth premium for job switching relative to job staying has contracted dramatically in recent years, according to the Atlanta Fed’s Wage Growth Tracker, potentially contributing to workers’ reluctance to shift roles.

While the labor market has continued to avoid the negative scenario of rising layoffs, rebounding jobs growth has also not materialized. Instead, the combination of fewer separations and slower hiring paints a picture of stagnation through late 2024: Those who already have a job look increasingly unlikely to lose it or leave it, and those who don’t have a job have been less and less likely to find one quickly. Even as initial unemployment insurance claims ticked lower, continued claims–tracking the cumulative number UI recipients–ended 2024 6.1% higher than than the same period a year prior. 

Demand growth for certain worker segments are showing signs of life

While the job market at the end of 2024 remains characterized by stagnation, potential shifts among certain worker groups suggests hiring activity may pick up for some segments heading into 2025. Job openings ticked higher in November 2024, a potential signal that hiring may be following suit in the subsequent months. 

Shifts already observed in the unemployment index support this notion, especially given the types of workers reporting more pronounced improvement in labor outcomes. From October to November, job openings increased the most for higher-wage industries like financial activities and professional business services. Jobs in these sectors tend to correspond with higher education attainment, such as a college degree.

From October through the beginning of January, unemployment index values dropped for all education levels - but the decline was largest for those with at least a college degree. The uptick in high-paying sector job openings in correspondence with the subsequent decline in unemployment for highly educated workers may be a sign that hiring will begin to show improvement going forward, particularly in certain white collar sectors. An expansion of this trend would mark a change from the pattern observed over the past year, when lower-wage industries carried the bulk of responsibility for jobs growth.