Unprecedented levels of job change as the US labor market recovered from the pandemic last year gave workers more leverage to demand better wages and played a role in pushing inflation to its highest, a new study shows.
According to a paper released Monday by the Chicago Federal Reserve, an increase in the share of people looking for jobs helped push inflation to about 1 percent over the past year. This suggests that job-switching at times was about 20% of the price increases seen in 2021.
“The propensity of workers to look for a second job is a significant driver of inflation,” said Leonardo Melosi, a senior economist at the Chicago Fed and a co-author of the report.
Researchers said those who look for new work while on the job may end up with higher salaries — and more spending power — after changing jobs or receiving a pay increase from their current employer.
The process of changing jobs began last year as job postings surged and dropouts hit record highs. On average, about 4 million Americans quit their jobs each month last year — often in search of better pay or more flexibility.
Data released last week showed consumer prices posting their biggest annual gains in 40 years, after Fed officials are under more pressure to combat higher inflation. Given what happens to the trend, some analysts have termed great resignations, said Melosi, which could signal the future course of price increases.
If job changes stop as the pandemic subsides, this could help ease inflationary pressures. But if people continue to change jobs in search of better pay or new opportunities, inflationary pressures could continue, the researchers said.
Still, labor market turnover won’t be the only factor influencing inflation, Melosi said, noting that supply-chain disruptions and other factors are big drivers.
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