Bank of America’s chairman and CEO sees light at the end of the COVID-19 tunnel.
In an interview on CNBC’s “Squawk Box” on Thursday (May 28), Brian Moynihan said the combination of stimulus payments, the added federal unemployment benefits and the reopening of malls is rejuvenating a lifeless economy.
“We’re starting to see the economy come out of the hole,” he told the network. “The unemployment numbers are very high and very concerning. But on the other hand, if spending picks up, that will drive the economy back to where these people get their jobs back.”
Moynihan said the year began with a 10 percent rise in spending compared to January and February 2019. In March, he said spending fell 7 percent as the impact of the coronavirus was felt. April saw spending fall by as much as 30 percent. But in May, spending is off by just 5 to 10 percent.
“You’re seeing us come out of the depths of where we were, and that’s good news,” he told the news service. “That’s due to two things: People are starting to spend a little more money as the stimulus hits and, more importantly, the impact of the opening of various economies.”
When asked if he thinks unemployed workers will be recalled when their jobless benefits are exhausted this summer, Moynihan said that it depends.
“The American economy especially is driven by consumer spending,” he said. “If consumer spending picks up and the demand for services, especially in the service side of the economy, picks up … .and how fast we can cross that river to where there’s enough spending to re-employ the people.”
Most economists, including those at Bank of America, said Moynihan, predict that the unemployment rate will peak in the second quarter, which ends on June 30. But he did not rule out the possibility that the peak could extend into the fall and early next year.
“We went into the recession environment and then these people shut down, they’re reopening and that’s good news,” Moynihan said.
He credited the $1,200 and $2,400 stimulus payments as well as the $600 added federal unemployment benefit from the CARES Act for keeping families above water. The aid from Congress and the White House separates this downturn from others, he added.
Moynihan also noted that the average consumer checking balances with under $5,000 in their accounts monthly are up by 30 to 40 percent compared to a year ago.
“That means the stimulus is still in their accounts…” he said. “We’ll see if that stimulus can hold on long enough until re-employment comes back in and the confidence continues to build.”