The Changing Link between Labor Cost and Price Inflation in the United States

The link between US labor cost and price inflation has weakened notably over the past three decades. In this paper we document decline analyse potential contributing factors. We consider four important trends that have shaped economy of late: (i) improved anchoring expectations; (ii) changing constellation shocks hitting economy; (iii) increased trade integration (iv) rising firm market power. find expectations played a particularly relevant role but also latter two offer promising avenues to understand in pass-through from inflation. Our results bring supportive evidence view taken by FED context its monetary policy strategy review robust job can be sustained without causing an outbreak JEL Classification: C32, E24, E31