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Labor Market Dynamics During the 2021-24 Inflation Surge

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Abstract

This paper revisits the common interpretation that the surge in the vacancy-tounemployment ratio during the 2021–24 inflation episode primarily reflected an overheated labor market. Instead, I argue that the increase in vacancies relative to unemployment was largely driven by falling real wages and a rise in job-to-job transitions, as workers sought to recover lost purchasing power, rather than by broad-based labor market overheating.

Suggested Citation

  • Andrés Blanco, 2025. "Labor Market Dynamics During the 2021-24 Inflation Surge," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2025(3), June.
    • Handle: RePEc:fip:a00068:101161
    DOI: 10.29338/ph2025-03
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    References listed on IDEAS

    as
    1. Jordi Galí, 2015. "Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications Second edition," Economics Books, Princeton University Press, edition 2, number 10495, December.
    2. Hassan Afrouzi & Andres Blanco & Andrés Drenik & Erik Hurst, 2024. "A Theory of How Workers Keep Up With Inflation," NBER Working Papers 33233, National Bureau of Economic Research, Inc.
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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