A few hours before a divided Federal Reserve trimmed interest rates last week to keep the economy primed, the boss at one of the world’s biggest banks addressed whether the U.S. was in danger of slipping into a recession.
“My own gut tells me it’s not imminent,” JPMorgan Chase CEO Jamie Dimon said at the Business Roundtable on Wednesday in New York City, according to CNBC.
Dimon might well have been channeling his team of economists - data-driven forecasters like Jim Glassman, who that same morning also discounted the possibility of a near-term downturn.
“This constant worry about recession to me doesn’t make any sense,” Glassman said Wednesday between a series of speaking engagements that included stops in the Lowcountry and Upstate.
“If somebody tells you there’s going be a recession you have to ask them, ‘What makes you think that?’ And if you don’t have an obvious imbalance you can point to, I’m not sure what the point is,” he said.
“We know things can’t get a whole lot better, because when you’re at full employment there’s a limit to how far you can go,” he continued. “So the risk is that something bad happens and you slip. But I really think it’s way premature.”
Glassman is the head economist for JPMorgan’s commercial banking unit, which is in the early stages of a brick-and-mortar growth spurt that calls for about 50 offices in the Carolinas. The first Chase-branded retail branch in the Palmetto State recently opened on the campus of Clemson University.
Glassman said he’s been impressed by South Carolina and its industrial diversity.
“It’s very dynamic. ... It’s one of the surprising stories to me,” he said. “The automotive industry has moved here. You have Boeing. You have the port. And my guess is you’re trying hard to pull in technology.”
He’s equally upbeat about the shape of the U.S. economy, despite handwringing over the fallout from the trade war with China and the global slowdown. Last week, a closely watched outlook survey by the Business Roundtable, a group chaired by Dimon, showed a faltering sense of confidence among the nation’s top CEOs.
“American businesses now have their foot poised above the brake, and they’re tapping the brake periodically,” according to Josuha Bolten, the organization’s top executive.
In Glassman’s view, the angst isn’t supported by the data.
“To me, I think the U.S. economy is in phenomenal shape,” he said. “I think ... the setup today is the best I’ve ever known in the history that we know of business cycles because we’re back to full employment, all those pockets of hidden unemployment are gone and inflation is well-behaved.”
One notable outlier is manufacturing activity, which Glassman described as “stalled.”
“But it’s not about trade,” he added.
Rather, a slowdown in the nation’s energy patch and the impact on the data from the grounded fleet of Boeing 737 Max jets are the biggest drags, according to Glassman.
“When you look at the facts behind the scenes, there are idiosyncratic things going on that have nothing to do with trade,” he said. “It’s more about Texas and Boeing.”
It all makes for interesting times and thorny policy choices at the Fed, which is under intense pressure from the White House to keep the economy humming and was divided in its 7-3 decision to take a quarter-point off the top last week. Glassman imagined the reaction of a Rip Van Winkle-like character who suddenly awoke after a 10-year slumber.
“They would wonder why the Fed is being stimulative when the economy is in such good shape,” he said
Glassman doesn’t think another rate cut was needed last week based on the fundamentals, namely inflation and employment. At the same time, the central bank didn’t “go overboard” either in trying to prevent the threat of tariffs and other trade frictions from derailing the decade-long U.S. economic expansion, he said.
“This is kind of a unique episode for the Fed, and it’s justified to take out insurance,” Glassman said. “But the problem with insurance is that risk can work on both sides. … My own feeling is that when the economy is in recession, you can’t put enough stimulus in the economy. When the economy’s back to full employment you have to be careful not to overdo it, because that often sets the stage for the next cycle. If you overdo it, you start creating incentives to speculate. ... It’s very hard to see those at the time.”