August 9, 2022

I saw this over a week ago, but there was so much breaking news, I never got around to writing about it. Via The Intercept:

A Bank of America executive stated that “we hope” working Americans will lose leverage in the labor market in a recent private memo obtained by The Intercept. Making predictions for clients about the U.S. economy over the next several years, the memo also noted that changes in the percentage of Americans seeking jobs “should help push up the unemployment rate.”

The memo, a “Mid-year review” from June 17, was written by Ethan Harris, the head of global economics research for the corporation’s investment banking arm, Bank of America Securities. Its specific aspiration: “By the end of next year, we hope the ratio of job openings to unemployed is down to the more normal highs of the last business cycle.”

The memo comes amid a push by the Federal Reserve to “cool down” the economy, informed by much of the same rationale — that high wages are driving inflation. This year, the Fed has increased interest rates for the first time since 2018. Historically, this has often caused recessions, and that is exactly what appears to be happening now: The Commerce Department reported Thursday that the gross domestic product has fallen for the second quarter in a row, indicating that a recession may have already begun.

Now, I'm going to tell you something you may have already figured out: Most journalists aren't all that smart. They're generalists, and frequently lack the kind of institutional knowledge that would make them push back against this corporatist boilerplate.

Most interesting of all is that in Bank of America’s enthusiasm for the Fed going on the attack against working people, it gets the basic facts wrong: Wage pressures have turned out not to be, as its memo claims, “hard to reverse.”

“If you did see continually accelerating wage-growth, it would be a problem,” Dean Baker, senior economist at the Center for Economic and Policy Research, a liberal Washington, D.C., think tank, told The Intercept in an email. “That would almost certainly mean a wage-price spiral with ever higher inflation. However, [nominal] wage growth has slowed sharply from around a 6.0 percent annual rate to just over 4.0 percent in recent months. … So, [Bank of America wants] the Fed to raise rates (and unemployment) to attack a problem (accelerating wage growth) that doesn’t exist in the world.”

The memo therefore tells us what we suspected all along: The most powerful economic actors in the U.S. — entities like Bank of America and its clients — do not like working people to have power. But it’s nice to have it in their own words. Harris, the author, was not available for comment.

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