The rate of consumer price inflation in the US reached 7.5 per cent in January, the highest in forty years. However, in addition to global influences, unprecedented developments in the labour market are also contributing to the record prices.
“The propensity of workers to look for other jobs is an important factor driving up inflation,” Leonardo Melosi, an economist at the Chicago branch of the Federal Reserve, said in a study. According to his findings, the rate of job search for a better job in the United States has climbed to its highest level in several decades.
Currently, about 20 percent of people who currently have a job are looking for a better paying job. Effectively, this means that if they do find such a job, it contributes to inflation, as higher wages not only mean higher costs for employers, but also higher demand for goods and services, and therefore more upward pressure on prices in the economy.
The question is how long the current trend can continue. The unemployment rate seems to have bottomed out, and although it has not yet fallen to pre-pandemic levels, it probably has nowhere to fall. The US labour market is literally being sucked dry, and employers are therefore having to raise wages unprecedentedly in order to find people. Which leads to inflation again.
