Jamie Dimon warned two years ago that storm clouds and a hurricane were brewing in the US economy. The JPMorgan Chase CEO, one of the most closely followed figures across the globe for his views on the economy, among other topics, was off by miles.
The US economy not only skirted a recession — something many prominent economists also predicted at the time — but has been growing at an even faster pace than a year ago. On top of that, the unemployment rate has stayed below 4% for more than two years despite 11 rate hikes intended to slow the economy in an effort to curb decades-high inflation.
Dimon’s prior miscalculation isn’t stopping him from sounding the alarm again. In the bank’s annual shareholder letter released Monday, ahead of its Friday quarterly earnings report, Dimon said he has “concerns about persistent inflationary pressures.” That’s why he’s skeptical the economy will achieve a soft landing, where inflation continues to cool without causing an unemployment spike.
Federal Reserve officials share Dimon’s concerns, leading some to question whether any rate cuts should happen this year, starkly contrasting the median forecast of three cuts they made at last month’s meeting and first signaled back in December. But potentially persistent inflation isn’t the only red flag in the economy right now.
Fed Gov. Michelle Bowman said last week she’s even willing to consider raising rates “should progress on inflation stall or even reverse.” For now, she doesn’t think there’s a high likelihood that hikes will be merited.
Inflation measured by the Fed’s preferred gauge, the Personal Consumption Expenditures price index, is up 2.5% for the 12 months that ended in February, a slight acceleration from January. Consumer Price Index inflation also ticked up a bit to 3.2% in February.
Economists polled by FactSet predict March CPI data due at 8:30 a.m. ET Wednesday will deliver yet another blow, with annual inflation rising to 3.4%. Still, that’s much better than the 4.9% rate it was at last March.
The progress in inflation over the past year came from supply chain improvements, a higher supply of workers due in part to immigration, and lower energy prices, Bowman said in a speech last week.
“It is unclear whether further supply-side improvements will continue to lower inflation,” Bowman added. At the same time, like Dimon, she’s worried geopolitical conflicts and fiscal spending could put more pressure on prices.
Although the economy is booming by many measures, including last month’s blowout jobs report, small business owners aren’t feeling gung-ho about it.
An index produced by the National Federation of Independent Business gauging how small-business owners expect to fare in the future dropped to its lowest level since 2012 last month.
The main contributor to the decline was a significant fall in the share of business owners who expect their inflation-adjusted sales to be higher during the next three months compared to current levels.
“The small business sector is showing signs of a potential slowdown,” NFIB head Holly Wade and the trade organization’s chief economist Bill Dunkelberg said in a report published Tuesday. “Continued stress in navigating inflation pressures leads as the top business problem,” they added.
Higher inflation is also weighing on consumers who are shouldering a record level of credit card debt.
And the highest share of consumers since the onset of the pandemic said they’re unsure if they’ll make a minimum debt payment on time, according to the New York Fed’s monthly Survey of Consumer Expectations that was released on Monday.
Across all age groups, the uptick was most profound among 40- to 60-year-olds. That’s significant because that cohort is experiencing an even lower unemployment rate than the nation overall.
