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Bank of America CEO talks recession odds and $22/hour wages

·Anchor, Editor-at-Large
·3 min read
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DAVOS, Switzerland — Don't put Bank of America (BofA) CEO Brian T. Moynihan in the imminent recession camp that is housing some economists and execs at this year's World Economic Forum (WEF).

"The American consumer is very strong, so that presents a challenge for the Fed — but it's also a good thing to be working against," Moynihan told Yahoo Finance Live at the return of the meeting of big thinkers and power brokers in Davos, Switzerland (video above).

Moynihan came armed with some upbeat data on how BofA customers are spending in May to support his stance.

The consumer's "leverage is in great shape," Moynihan said. "Even though stimulus stopped in March of last year, the account balances of our customers at Bank of America have gone up every month since last June or July. If you think about their ability to borrow, their credit card balances are still down from $100 billion to $80 billion. That means the same customers can go back and borrow the money, they are highly creditworthy."

Bank of America Chaiman and CEO Brian Moynihan gestures while speaking during a session on the opening day of the World Economic Forum (WEF) 2018 annual meeting, on January 23, 2018 in Davos, eastern Switzerland. (Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)
Bank of America Chaiman and CEO Brian Moynihan gestures while speaking during a session on the opening day of the World Economic Forum (WEF) 2018 annual meeting, on January 23, 2018 in Davos, Switzerland. (Photo by FABRICE COFFRINI/AFP via Getty Images)

Spending in May is up 10% year over year, he added, though spending dynamics have changed.

"They are out doing things," Moynihan said. "Now it has shifted more to services like travel, restaurants are strong."

Given these economic signals, Moynihan and BofA decided to reinvest in the company's workforce and retain talent against a low-unemployment backdrop. Bank of America announced on Monday that it raised its U.S. hourly minimum wage to $22, and the company is on track to take wages to $25 an hour by 2025.

"We basically made a decision to invest in careers for our teammates," the CEO said.

Recession chatter

The mood on the ground at WEF on the topic of a U.S. recession has cut a couple of different ways.

On one hand, policymakers have delivered a very muted assessment of a global economy dealing with brutal inflation and in the early innings of a slowdown partially induced by the Federal Reserve.

International Monetary Fund (IMF) managing director Kristalina Georgieva said on a panel Monday that the "horizon has darkened" for the world's economy. In April, the IMF slashed its global growth outlook for the second time this year.

On the other hand, most CEOs that Yahoo Finance has chatted up at the gathering still see trends in their businesses that suggest the U.S. economy will grow into 2023.

Back to the first hand: Optimism hasn't held as well for their European businesses as CEOs have been saying that they are experiencing strong slowdowns amid supply chain challenges, inflation, and uncertainty borne from the Russia-Ukraine war.

"I think there is a slowing," Intel CEO Pat Gelsinger told Yahoo Finance Live. "People are fighting inflation. There is going to be a tightening of monetary policy as well. I think these are all natural. Clearly we have Shanghai port shutdowns. Europe is trying to figure out what it looks like with the Ukraine situation. So I think there is a general softening and general tightening of policy. We think that is probably a couple of quarters in front of us."

Whether those nasty conditions blow across the pond to the U.S. is anyone's guess, but the bearish action in the stock market hints they might. And an ugly sales warning from social media platform Snap — due mostly to a pullback in ad spending by customers — isn't helping market sentiment.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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