Attn Millennials and Gen X, Y, Z: Your in good shape so long as you move in w your parents and give up that pipe dream of owning a home.
Jamie Dimon says consumers are in 'good shape' — even if a recession hits
But things could be different if the economy falls into 1970s-style "stagflation," the JPMorgan Chase CEO said
By Rocio Fabbro, Quartz Media
PublishedYesterday
JPMorgan Chase & Co. CEO Jamie Dimon is feeling good about the U.S. economy — for now.
The economy is “unbelievable” and is “booming,” and has been since the pandemic, Dimon said in an interview at an event at the Economic Club of New York on Tuesday. With the unemployment rate below 4% since January 2022 and Americans much wealthier than they were just a few years ago thanks to pandemic-era savings, Dimon is somewhat optimistic that consumers will be resilient.
“Even if we go into a recession, consumers are in good shape,” Dimon said.
For their part, Americans still feel uncertain about the overall state of the economy. The University of Michigan Index of Consumer Sentiment has stayed relatively unchanged in the first months of 2024, as people’s feelings towards the economy remain largely mixed.
The story will be different if the U.S. falls into “stagflation” — an economic scenario where inflation stays high (or keeps climbing), economic growth slows, and unemployment creeps back up, according to Dimon. In that case, things might not be so rosy.
“But that doesn’t mean you can fight off the effects of stagflation or something like that if it gets much worse,” Dimon said. “I worry that it looks more like the ’70s than we’ve seen before.”
Following a boom period, stagflation destabilized the country’s economy in the 1970s, driven by high budget deficits, lower interest rates, an oil embargo levied by the Organization of Arab Petroleum Exporting Countries (OAPEC), and a currency crisis. At the time, deficits were half what they are today and the ratio between debt and Gross Domestic Product (GDP) was 35%, Dimon noted.
The ratio of public debt to gross domestic product is expected to reach 99% by the end of the year, and is projected to hit an all-time high of 116% in 2034. The average debt-to-GDP ratio over the last 50 years was approximately 48%.
In 2023 alone, the real federal budget deficit more than doubled to $2 trillion from $933 billion a year earlier. And according to the Congressional Budget Office’s projections, the federal budget deficit will grow another $1.6 trillion this year.
“Part of the reason I think we’ve had this strong growth is the fiscal spending,” Dimon said. “Why not spend another $2 trillion? If we did, what would happen? You’ll have more money, people invest more money, people will hire more people, and you’ll have more growth. But it’s also quite inflationary.”
It’s true that inflation has been sticky so far this year. The consumer price index crept up to 3.5% in March, continuing an upward trend that has raised doubts about the highly-anticipated Federal Reserve interest rate cuts.
Interest rates are currently sitting at 5.25% to 5.5% amid the Fed’s ongoing fight against inflation, which has fallen considerably from its 2022 highs but remains elevated above the Fed’s target of 2%.
Still, Dimon says the economy is “in pretty good shape” and looks like it’s on track for a potential soft landing, where the government wrangles inflation without falling into a recession.
“But put me on the cautious side of that one,” he said.