This IMF Working Paper examines the relationship between labor market power and monetary policy using data from online vacancy postings in the US. The authors find that labor market power amplifies the effects of monetary policy on labor demand, while not significantly affecting wage growth. A search and matching model is used to explain these findings, with firms able to attract workers by offering higher wages or posting more vacancies. The authors also find that vacancies that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. These results help explain the "wageless" recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, particularly for low-skilled workers.
