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Although inflation is cooling, high prices remain a burden for many Americans.
new York
CNN
—
Jamie Dimon warned two years ago that storm clouds and a hurricane were brewing in the US economy. The CEO of JPMorgan Chase, one of the world's most followed figures for his views on the economy and other issues, was way off the mark.
Not only did the U.S. economy avoid recession – something many prominent economists had predicted at the time – but it grew even faster than a year ago. Additionally, the unemployment rate has remained below 4% for more than two years, despite 11 interest rate hikes to slow the economy and curb decades of inflation.
Dimon's previous misjudgment doesn't stop him from sounding the alarm again. In the bank's annual letter to shareholders, released Monday ahead of Friday's quarterly earnings report, Dimon said he was “concerned about ongoing inflationary pressures.” That's why he's skeptical that the economy will achieve a soft landing in which inflation cools further without causing a rise in unemployment.
Federal Reserve officials share Dimon's concerns, leading some to question whether there should be rate cuts this year, in stark contrast to the average forecast of three cuts they made at last month's meeting and for the first time announced in December. But potentially persistent inflation is not the only warning sign for the economy at the moment.
Fed Governor Michelle Bowman said last week that she would even be willing to consider raising interest rates “should inflation stall or even reverse.” Right now, she doesn't think there's much chance the increases will be worth it.
Inflation, measured by the Fed's preferred measure, the Personal Consumption Expenditure Price Index, rose 2.5% in the 12 months ended in February, a slight acceleration from January.
The latest consumer price index, released on Wednesday, showed annual inflation rose to 3.5% in March. Still, that's much better than the 4.9% in March last year.
Progress on inflation last year was due to supply chain improvements, increased labor supply, partly due to immigration, and lower energy prices, Bowman said in a speech last week.
“It is unclear whether further improvements on the supply side will continue to reduce inflation,” Bowman added. At the same time, like Dimon, she fears that geopolitical conflicts and government spending could increase pressure on prices.
Although the economy is booming in many ways, including last month's mass jobs report, small business owners aren't thrilled about it.
An index created by the National Federation of Independent Business that measures how small business owners will fare in the future fell last month to its lowest level since 2012.
The main reason for the decline was a significant decline in the proportion of business owners who expect their inflation-adjusted sales to be higher in the next three months compared to current levels.
“The small business sector is showing signs of a possible slowdown,” NFIB chief Holly Wade and the trade group’s chief economist Bill Dunkelberg said in a report released Tuesday. “Ongoing stress in managing inflationary pressures is the biggest business concern,” they added.
Higher inflation is also weighing on consumers, who are carrying record levels of credit card debt.
And the highest share of consumers since the start of the pandemic said they were unsure whether they would pay the minimum debt on time, according to the New York Fed's monthly survey of consumer expectations released Monday.
Across all age groups, the increase was most noticeable among 40 to 60 year olds. This is significant because this cohort has an even lower unemployment rate than the country as a whole.
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