Social Security Payments ‘Going up at a High Rate,’ Says CEO

Blank U.S. Treasury checks run through a printer at the U.S. Treasury facility in Philadelphia, Pa. William Thomas Cain/Getty Images

American consumers are still in “pretty good shape” despite the Federal Reserve setting interest rates to their highest levels in decades to tame inflation, Bank of America Chief Executive Brian Moynihan said at the World Economic Forum’s annual meeting.

“So it (growth) is solid. And that consumer spending, it goes back to the question of why the U.S. in pretty good shape,” Moynihan told Reuters at the Davos, Switzerland, event. “It’s a consumer-led consumption economy. The consumers are spending, their wages are growing and frankly, there’s still a lot of stimulus in accounts and there’s more ... Social Security payments are going up at a high rate, things like that that are going to add more fuel that they can use to spend.”

Moynihan was likely referring to the Social Security Administration’s announcement that the cost-of-living adjustment, or COLA, for Social Security payments increased by 8.7 percent for 2023. That’s because of decades-high inflation that endured for most of last year.

He told the newswire service that the U.S. economy could enter a mild recession later in 2023 or in 2024. For the rest of the world, the CEO said, the bank is still predicting growth.

“And the reason why we still feel they feel confident, and they’re the economic experts, but even talking to CEOs, yes, they feel that earnings may be under pressure from margins, from demand and things like that,” Moynihan remarked, adding that “business plans are solid and they continue to perform, but they’re being careful because with higher interest rates, that’s more expensive. With higher interest rates, demand may change and so they’re being careful.”

Wall Street’s biggest banks have stockpiled more rainy-day funds to prepare for a possible recession, while showing caution about forecasting income growth in an uncertain economy and as higher rates increase competition for deposits.

Brian Moynihan, CEO of Bank of America addresses the CEOs of global companies awarded the Terra Carta Seal. in Glasgow, Scotland on Nov. 3, 2021. Ian Forsyth/Getty Images

Despite Moynihan’s public optimism, two-thirds of private and public sector economists predict a global recession sometime in 2023, according to a World Economic Forum survey. Moynihan said that for the first time in a long time deposits had come down a little bit for the industry.

Meanwhile, Moynihan said that he and other business executives met with a group of U.S. congressional leaders in Davos, without specifying the participants. Reports indicated that Sens. Joe Manchin (D-W.Va.), Kyrsten Sinema (I-Ariz.), and Chris Coons (D-Conn.) attended the forum, while Republican Gov. Brian Kemp said in a statement that he’s attending.

“It was bipartisan, and it’s good to see them here,” he said. “They want to listen, they want to hear what’s going on, and they can also get a feel from the international business community about how the United States was perceived in terms of a place to invest, and it’s very positive right now.”

UN Warning

The head of the United Nations, Antonio Guterres, warned there would be a global economic downturn in the near future.

“We are looking into the eye of a Category 5 hurricane. Our world is plagued by a perfect storm on a number of fronts,” Guterres said. “Start with the short term, the global economic crisis. The outlook, as we all know, is bleak. Many parts of the world face recession, and the entire world faces a slowdown. And we see deepening inequalities and the rapidly unfolding cost of living crisis … supply-chain disruptions and an energy crunch, soaring prices.”

Meanwhile, tech companies have already started layoffs. Microsoft on Wednesday confirmed it would cut 10,000 jobs as it prepares for slower growth.

The World Economic Forum’s annual meeting in Davos takes place this week, ending Jan. 20.

Reuters contributed to this report.