Job Search, Wages, and Inflation
How do inflation expectations affect the job search behavior of workers when wages are set in nominal terms? A canonical job search model incorporating nominal wage rigidities implies that on-the-job search should increase with expected inflation. In a novel survey, we show that workers are more likely to search at higher values of hypothetical inflation. In the Survey of Consumer Expectations, within-respondent variation in inflation expectations predicts search. A back-of-the envelope calculation suggests the search mechanism and the 2021-2023 rise in inflation expectations can explain roughly 30 percent of the change in the job-to-job transition probability over that period.
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