Firm Wage Setting, On-the-Job Search, and the Inflationary Effects of Supply Shocks

Museum & Visits Regional Economy Data & Statistics Careers Blogs News & Events

About the New York Fed
- About the New York Fed
- What We Do
- Who We Are
  - Bank Leadership
- Communities We Serve
- Governance
- More About Us
- At the New York Fed, our mission is to make the U.S. economy stronger and the financial system more stable for all segments of society. We do this by executing monetary policy, providing financial services, supervising banks and conducting research and providing expertise on issues that impact the nation and communities we serve.
  
  The Teller Window is a publication featuring expert knowledge and insight from the New York Fed, including thoughts and perspectives from senior leaders.
  
  Do you have a request for information and records? Learn how to submit it.
  
  Learn about the history of the New York Fed and central banking in the United States through articles, speeches, photos and video.
Markets & Policy Implementation

Economic Research
- Economic Research
- U.S. Economy
  - Consumer Expectations & Behavior
  - Growth & Inflation
  - Labor Market
  - Financial Stability
  - Banking
- REGIONAL ECONOMY
- RESEARCHERS
  - PUBLICATIONS
  - RESEARCH CENTERS
  - CALENDAR

Financial Institution Supervision
- Financial Institution Supervision
- Supervision & Regulation
  - Circulars
  - Regulations
- Reporting Forms & Instructions
  - Reporting Forms
  - Correspondence
- Bank Applications
- Consumer Protection
  - Community Reinvestment Act
  - Frauds and Scams
- As part of our core mission, we supervise and regulate financial institutions in the Second District. Our primary objective is to maintain a safe and competitive U.S. and global banking system.
  
  The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
  
  Need to file a report with the New York Fed? Here are all of the forms, instructions and other information related to regulatory and statistical reporting in one spot.
  
  The New York Fed works to protect consumers as well as provides information and resources on how to avoid and report specific scams.
Financial Services & Infrastructure
- Financial Services & Infrastructure
- Financial Services & Operations
- Financial Market Infrastructure & Reform
- The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
  
  The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
  
  The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
  
  The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
Community Development
& Education

Staff Reports

Firm Wage Setting, On-the-Job Search, and the Inflationary Effects of Supply Shocks

Previous titles: “Do Cost-of-Living Shocks Pass Through to Wages?" and "Firm Wage Setting and On-the-Job Search Limit Wage-Price Spirals”

Number 1126
October 2024 Revised September 2026

JEL classification: E31, E52

Authors: Justin Bloesch, Seung Joo Lee, and Jacob P. Weber

We argue that if firms set wages and workers search on-the-job, then pass-through from prices to wages is weak, limiting the cumulative inflationary effects of supply shocks. We derive a tractable general equilibrium model with firm wage setting and on-the-job search, yielding an empirically-realistic wage Phillips curve tying worker quits to wage growth. In our model, price level increases reduce real wages at both workers’ current job and their outside options, muting firms’ incentive to raise wages. Quantitative exercises reveal that counterfactually assuming union wage-setting can overstate wage and price inflation following oil shocks.

Full Article

Author Disclosure Statement(s)

Justin Bloesch
This author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Seung Joo Lee
This author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Jacob Weber
This author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Suggested Citation:
Bloesch, Justin, Seung Joo Lee, and Jacob P. Weber 2024. “Firm Wage Setting, On-the-Job Search, and the Inflationary Effects of Supply Shocks.” Federal Reserve Bank of New York Staff Reports, no. 1126, revised September 2026. https://doi.org/10.59576/sr.1126

By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.