Do employees have too much leverage? Bank Of America memo says workers’ power ‘we hope’ is weakening

In May, there were two job openings for every unemployed person in the United States, and when the balance of power between workers and employers tilts heavily in favor of workers, it becomes a concern for some companies, including Bank of America. .

A private Bank of America rating obtained by The Intercept suggests that high unemployment is good for business. A BofA executive wrote in the memo that “we hope” American workers will lose their influence in the labor market.

The memo, written by Ethan Harris — head of global economic research for Bank of America Securities — also predicts that over the next few years the balance of power will shift and the percentage of Americans seeking ‘a job’ is expected to drive up the unemployment rate. ”

The jobless to job vacancy ratio was 0.5 in May 2022, according to the Labor Department. By June, it had risen to 0.6.

The lower the ratio of vacancies to unemployed, the more options the unemployed have when seeking employment and the more opportunities employed workers have to move to jobs with better pay and working conditions. .

Power in the hands of workers has always been a nightmare scenario for corporate management, which sometimes goes to great lengths, such as blowing up unions to prevent employees from gaining power.

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In 2009, after the financial crisis and the collapse of the real estate bubble, the ratio of unemployed people per job offer jumped to 6.5 with more than six unemployed people for every open job. Then it slowly declined over the next decade, reaching 0.8 in February 2020 before the Covid-19 lockdowns began.

The recent rare moment of worker leverage has made Bank of America very anxious, Ken Klippenstein and Jon Schwarz wrote for The Intercept. “The memo expresses distress at “a record labor market,” stating that “wage pressures will… be difficult to reverse. While there may have been one-off increases in some pockets of the labor market, the upward pressure extends across virtually all sectors, incomes and skill levels.

Corporate profits have played an outsized role in the recent spike in inflation. After-tax corporate profits were 8.1% of the economy at the start of 2020 before the covid shutdowns, but are now at 11.8% of GDP. In the United States, that equates to an increase of more than $700 billion in profits per year, The Intercept reported.

Rising corporate profits account for more than 50% of recent price increases, according to the nonprofit Economic Policy Institute (EPI).

“Rising inflation has not been driven by anything resembling an overheated labor market, but rather by higher corporate profit margins and supply chain bottlenecks,” wrote Josh Bivens for the PPE. “Policy efforts to cool labor markets – such as very rapid and steep increases in interest rates – are unlikely to be necessary to contain inflationary pressures over the medium term.”

Rather than focusing on earnings, Bank of America’s note focused on “the tantalizing prospect of the Federal Reserve raising interest rates, slowing the economy and bludgeoning workers back into business.” rank,” reported The Intercept.

Bank of America’s profit fell 34% to $5.93 billion, or 73 cents per share, in the second quarter. Its investment banking fees fell 47% to $1.1 billion in the second quarter. Despite inflation at its highest level in 40 years, spending by Bank of America’s 60 million household customers rose 11% to $220.5 billion.

BofA’s memo “tells us what we suspected all along: America’s most powerful economic players – entities like Bank of America and its customers – don’t like workers having power. But it’s good to have it in their own words,” reported The Intercept.