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Job-to-job flows and inflation: Evidence from administrative data in New Zealand

Özer Karagedikli

Job-to-job flows, characterised as the number of workers moving from one job to another without a spell of unemployment, have attracted renewed attention in the academic, and policy literature in recent years. In this note, I use the administrative Linked Employee and Employer Data (LEED) to create novel measure of job-to-job flows for New Zealand, and then examine their forecasting performance for non-tradable inflation and wage growth in New Zealand. Job-to-job flows outperform other measures at every forecast horizon. In this note, I also argue that job-to-job flows are an indirect measure of ‘marginal cost’, and deserve closer attention in understanding inflation dynamics. Job-to-job flows have been increasing very slowly since the recession of 2008-2009, and this is one contributing explanation for the low wage growth and inflation outcomes observed in recent years.