Bank of America CEO Brian Moynihan is sticking to his earlier predictions that a US recession, if it comes, won’t be as bad as people fear.
“How could there be a recession without unemployment?” Moynihan asked on CBS News’ Face the Nation on Sunday, citing the 263,000 new jobs reported in Friday’s US jobs report.
Bank of America’s CEO said Sunday he expects the U.S. economy to contract “just 1%” in the first three quarters of 2023 and then return to positive growth. “This is a milder recession,” Moynihan said.
Moynihan was more optimistic about the US economy than some of his peers. Last week, Bank of America’s CEO predicted a mild downturn at CNN, joking, “Hurricane season is now over.” face)
In June, Bank of America’s new head of US economics forecast that the US could experience a mild recession by the end of 2022. But strong consumer spending in September prompted Bank of America’s research team to push back its recession forecast to 2023. “They keep pushing,” Moynihan joked at last month’s Fortune CEO Initiative conference.
Moynihan’s more optimistic assessment of the US economic future stands in sharp contrast to other gloomy forecasts.
In October, Nouriel Roubini, the New York University professor often referred to as “Dr. Doom” for his predictions about the 2007 housing crash, said he expected the US to face a “long and ugly” recession.
Last week, in an op-ed for the Financial Times, Mohamed El-Erian, Allianz chief economic adviser, called out the banks that predicted a “short and shallow” recession. El-Erian says he’s concerned they “risk a repeat of the analytical and behavioral pitfalls that emerged in last year’s ill-fated inflation call.”
A June survey by the Financial Times found that two-thirds of US economists expect a recession to hit next year. CEOs are also concerned as 98% of business leaders are preparing for a recession in the next 12 to 18 months, according to an October Conference Board poll.
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But on Sunday, Moynihan defended his more optimistic view by pointing to the US’ strong performance amid Federal Reserve rate hikes.
“When the Fed started raising rates, they believed there was going to be an immediate economic downturn,” Moynihan said. “That didn’t happen.”
Other banks are also considering the possibility of a US recession on better-than-expected economic data. Both Goldman Sachs and Morgan Stanely forecast in November that the US could narrowly avoid a recession.
The Bank of America CEO pointed to some negative indicators, such as a flagging housing market and a slowdown in consumer spending. But Moynihan says the volatility shows the US economy is becoming more sustainable.
In particular, declining vacancies and turnover are not good for individual job seekers, says Moynihan, but they are “actually good signs for the economy in terms of starting to get into a better spot where it can grow at a more normal pace. ”
Bank of America economists are forecasting that unemployment will rise to 5.5% by next year, according to a research note released last week. People losing their jobs are “a terrible thing,” Moynihan said Sunday, but the US has seen unemployment rates like this before. Before the COVID-19 pandemic, the US last recorded an unemployment rate of 5.5% in May 2015.
“We didn’t feel terrible at the time,” Moynihan said.
This story was originally published on Fortune.com
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