A Bank of America executive in a leaked memo wrote “we hope” that the ratio of job openings to the number of unemployed lessens significantly, meaning American workers will have fewer options.
Ethan Harris, the head of global economics research for the corporation’s investment banking arm, Bank of America Securities, explained in a memo titled “Mid-year review” that will be accomplished through a slowing economy and hence higher unemployment numbers.
The Intercept, which obtained a copy of the memo, said the June 17 document is meant to make predictions for Bank of America’s clients concerning the direction of the economy.
“We expect growth to fade close to zero by the second half of next year as the lagged impact of tighter financial conditions cools the economy,” Harris wrote, pointing to the Federal Reserve’s raising of interest rates.
The result will be a “weaker demand for workers,” he explained.
“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,” Harris added.
The federal government calculates the ratio the other way around: The number of unemployed workers to job openings. However, right now, due to the tight labor market, the statistic is reversed.
The Bureau of Labor Statistics reported that the ratio stood at 0.5 as of May, i.e, there were two job openings for every unemployed person.
At the end of May, there were 11.3 million job openings and as of last month 5.9 million unemployed Americans.
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By way of comparison, in July 2009 as a result of the Great Recession, the ratio of unemployed to job openings was 6.5. That meant over 6 unemployed people for every job available.
In January 2020, just prior to the COVID-19 lockdowns during the hot economy under then-President Donald Trump, the ratio was 0.8, so slightly favoring workers, but close to one opening for everyone looking for work.
And of course, inflation was at an annual 2.5 percent rate, versus the 9.1 percent that we’re experiencing now.
Harris predicted inflation will come down as both the supply of goods has increased and the demand is going down.
However the tight labor market will continue to create inflationary pressure and “wage pressures are going to be harder to reverse,” he wrote.
How did we get such a tight labor market? President Joe Biden and the Democrats definitely played their part.
The $1.9 trillion American Rescue Plan incentivized people not to work. Throw in bad energy policies and your have 40-year high inflation.
Harris rightly observed that the Fed has responded by raising interest rates, which he “hopes” will ease the tight labor market by slowing the economy, which is happening.
In that sense, he’s hoping things get worse for the American worker, which is not a good place to be.
