JPMorgan CEO Warns of Looming Risks for Economy

JPMorgan CEO Warns of Looming Risks for Economy
JP Morgan CEO Jamie Dimon looks on during the inauguration the new French headquarters of JP Morgan bank in Paris, on June 29, 2021. (Michel Euler/Pool via Reuters)
Naveen Athrappully

JPMorgan CEO Jamie Dimon has warned about a potential economic slowdown even while noting that the American economy is growing, and both the job market and consumer spending remain healthy.

“Geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go, and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road,” Dimon said in the company’s Q2 earnings press release published on July 14.

Due to this outlook, the bank has “temporarily suspended share buybacks” so that it can reach regulatory capital requirements.

Though Dimon said the U.S. economy is growing, it contracted by a 1.6 percent annualized rate during the first quarter of 2022. The labor market showed signs of strength last month by adding more jobs than expected while consumer spending in May grew at a subdued pace.

The JPMorgan CEO’s predictions came as annual inflation reached a new four-decade high in June, hitting 9.1 percent. This is up from 8.6 percent in May and exceeded market expectations of 8.8 percent. Food prices jumped by 10.4 percent while energy prices soared by 41.6 percent.

In its most recent Beige Book report, the U.S. Federal Reserve had warned that “substantial price increases” were observed across all of its 12 districts at “all stages of consumption,” barring a few.
The price increase in food, energy, and commodities “remained significant,” it added. The Boston District reported that worries about inflation were posing “significant threats” to future economic activity.

Odds of Recession ‘Greater than 50 Percent’

Rising inflation has many people worried about a recession. According to a survey conducted between June 10 and 14 by MagnifyMoney, 70 percent of Americans believe a recession is coming, with 59 percent predicting it will happen within the next six months. Over two-thirds say they are financially unprepared to deal with a recession.
In an interview with CNBC, Richard Kelly, head of global strategy at TD Securities, said that America is facing the triple risks of rising gas prices, a slowing economy, and a hawkish Federal Reserve. The odds of a recession in the next 18 months are “greater than 50 percent,” he said.

According to William Stack, financial adviser and author at Stack Financial Services, signals of recession are already popping up.

“The economy is slowing down, while [inflation] is still making a significant impact,” he told The Epoch Times. “Real wages are down 4.4 percent, when considering inflation. This impacts consumer spending, which makes up 65–70 percent.”
Andrew Moran contributed to the report.