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Job-to-Job Mobility and Inflation

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Abstract

The low rate of inflation observed in the U.S. over the past decade is hard to reconcile with traditional measures of labor market slack. We develop a theory-based indicator of interfirm wage competition that can explain the missing inflation. Key to this result is a drop in the rate of on-the-job search, which lowers the intensity of interfirm wage competition to retain or hire workers. We estimate the on-the-job search rate from aggregate labor-market flows and show that its recent drop is corroborated by survey data. During "the great resignation", the indicator of interfirm wage competition rose, raising inflation by around 1 percentage point during most of 2021.

Suggested Citation

  • Renato Faccini & Leonardo Melosi, 2023. "Job-to-Job Mobility and Inflation," Working Paper Series WP 2023-03, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:95629
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    File URL: https://www.chicagofed.org/publications/working-papers/2023/2023-03
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    Cited by:

    1. Darougheh, Saman & Faccini, Renato & Melosi, Leonardo & Villa, Alessandro T., 2024. "On-the-Job Search and Inflation under the Microscope," The Warwick Economics Research Paper Series (TWERPS) 1536, University of Warwick, Department of Economics.
    2. Barnichon, Régis & Shapiro, Adam Hale, 2024. "Phillips meets Beveridge," Journal of Monetary Economics, Elsevier, vol. 148(S).
    3. Florio, Anna & Siena, Daniele & Zago, Riccardo, 2025. "Global value chains and the Phillips curve: A challenge for monetary policy," European Economic Review, Elsevier, vol. 174(C).
    4. Hie Joo Ahn & Jeremy B. Rudd, 2024. "(Re-)Connecting Inflation and the Labor Market: A Tale of Two Curves," Finance and Economics Discussion Series 2024-050r1, Board of Governors of the Federal Reserve System (U.S.), revised 28 May 2025.
    5. Nuarpear Lekfuangfu & Nuttapol Lertmethaphat, 2025. "Building Thailand’s Beveridge Curve: New Insights of Thailand’s Labour Markets with Internet Job Platforms," PIER Discussion Papers 232, Puey Ungphakorn Institute for Economic Research.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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