Using the near universe of online vacancy postings in the U.S., we study the interaction between labor market power and monetary policy. We show empirically that labor market power amplifies the labor demand effects of monetary policy, while not disproportionately affecting wage growth. A search and matching model in which firms can attract workers by either offering higher wages or posting more vacancies can rationalize these findings. We also find that vacancy postings that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. Our results help explain the "wageless" recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, especially for the low-skilled, who saw stagnant wages but a robust decline in unemployment.

Using the near universe of online vacancy postings in the United States, we explore linkages between labor market power and the trade-off between unemployment and wages. We estimate the Phillips curve at the commuting zone level and find that the relationship between unemployment and wage inflation is weak in regions with high labor market power. These results help explain the flattening of the wage Phillips curve following the global financial crisis. In the context of rising interest rates, unemployment is likely to rise more in poorer US regions because labor market power is more prevalent there, thus leading to rising inequality.