By Jonnelle Marte

(Reuters.) – Workers had more options to negotiate for higher pay, and the unprecedented amount of job switching that took place last year when the U.S. labor markets recovered from the pandemic led to a rise in inflation.

According to the Chicago Federal Reserve paper, inflation rose by around 1 percent last year due to an increase in people searching for work while they are employed. This was according Monday’s release. This suggests that job switching was responsible for about 20% of 2021’s price rise.

Leonardo Melosi (a Chicago Fed senior economist and coauthor of this report) said that “workers’ propensity for searching for another job inflation.”

According to researchers, people looking for work can find higher incomes and greater spending power when they switch jobs.

Last year, job switching was a big deal as more people were posting jobs and quitting at record rates. On average, nearly 4 million Americans quit their job each month in 2013 – many times to get more freedom and better pay.

Fed officials face increased pressure to reduce inflation following data that showed consumer prices saw their biggest annual increase in over 40 years. Melosi stated that it could be a clue as to what the future holds for price rises by watching the trends Melosi has called the Great Resignation.

Inflationary pressures could be eased if job switching slows as the pandemic subsides. Research suggests that inflationary pressures can continue if people keep changing jobs to get better salaries or more opportunities.

Melosi stated that labor market turnover is not the sole factor driving inflation. He also noted that other drivers such as supply disruptions or other factors will have a greater impact on the economy.