JPMorgan Chase CEO Believes Recession is the Most Likely Scenario for the U.S.

JPMorgan Chase CEO Jamie Dimon stated on Wednesday that he still believes the odds of a ‘soft landing’ for the U.S. economy are around 35 to 40 percent, which in his opinion makes recession the most likely scenario for the largest global economy.

Dimon spoke in February that markets were too optimistic regarding the risks of recession, and this week he confirmed that his stance is ‘about the same’.

– There is a lot of uncertainty. I have always pointed to geopolitics, housing, deficits, consumption, elections, quantitative tightening… All of this creates fears in the markets – said Dimon.

Dimon, the head of the largest U.S. bank by assets and one of the most respected figures on Wall Street, has been warning about economic problems and collapse since 2022, but the U.S. economy has held up better than expected, and Dimon stated this week that, although it seems so, the U.S. is currently not in recession. He added that he is ‘somewhat skeptical’ that the Federal Reserve can reduce inflation to the targeted two percent due to future costs of the green transition and military.

– There is always a wide range of potential outcomes. I am completely optimistic that if we have a mild recession, even a tougher one, we would be okay. Of course, I sympathize with people who lose their jobs. No one wants a hard landing – concluded Dimon.

It should be noted that speculation about a recession in the U.S. has increased since Friday when data was released showing that employment in the U.S. significantly slowed in July, with 100,000 fewer new jobs recorded than the monthly average over the past 12 months and that the unemployment rate is higher.

Other Positive Indicators

Employers net opened 114,000 new jobs in July, down from 179,000 in June and 216,000 in May, according to revised data reported by Hina. New data shows that in the previous two months, net job openings were 29,000 fewer than previously estimated.

The unemployment rate in the U.S. was 4.3 percent in July, up by 0.2 percentage points from June. The number of unemployed increased by 352,000 compared to June, reaching approximately 7.2 million. Year-on-year comparisons show that the unemployment rate has risen by 0.8 percentage points, and the number of unemployed by about 1.3 million.

These data have stirred global stock markets, which marked the beginning of the week with a decline or correction in stock prices, prompting many to flee from risky stocks and shift focus to safe havens like the yen and franc.

Despite worse-than-expected data related to the U.S. labor market, as previously reported in Lider, regarding other indicators, there is still no talk of recession in the U.S. In the second quarter, U.S. GDP grew by 2.8 percent, double the growth in the first three months. Moreover, such quarterly growth corresponds to the average economic growth recorded in the U.S. in the three years before the pandemic. A more precise indicator of economic activity that the Federal Reserve closely monitors – growth in personal consumption – remained at 2.6 percent in the second quarter. The same applies to the state of the service sector, which accounts for two-thirds of U.S. economic activity. The S&P service sector index in July was near its highest level in the last two years.

Whatever the reason, this is neither the first nor certainly the last significant drop in stock prices. Moreover, stock market history shows that in such cases, it is merely the announcement of the beginning of a new episode of growth. In the last 44 years, the Nasdaq index has entered correction 24 times, or on average every two years, according to Reuters’ analysis of LSEG data. In two-thirds of cases, the index reached a higher level just one month after the correction occurred.