Jamie Dimon Still Sees a 65% Chance of a Recession

JPMorgan Chase CEO Jamie Dimon has reinforced his effective estimate of a 65% chance that a recession would happen in the U.S. economy.

Speaking to CNBC and responding to a question, Dimon reiterated his belief that the chance of a soft landing for the economy was 35% to 40% and that his sense of the likelihood of a recession was “about the same” as he made back in March.

“The world is pricing in a soft landing, at probably 70-80%,” he said at the time, addressing the Australian Financial Review Business Summit in Sydney through a video link. “I think the chance of a soft landing in the next year or two is half that. The worst case would be stagflation.” He put the odds of a recession at around 65%.

Dimon has been bearish about the US economy for some time, warning in 2022 that a “hurricane” was about to hit the US economy. Further, he hadn’t been impressed by economic indicators since the pandemic, which he thought distorted their accuracy and now required “a grain of salt.”

His view clashes with others, including those of his own bank. JPMorgan Chase economists, led by Bruce Kasman, had thought as of the start of July that the chance of a U.S. recession was 25%. They increased that to 35% earlier this week and told clients in a note, as Bloomberg reported.

“This modest increase in our assessment of recession risk contrasts with a more substantial reassessment we are making to the interest rate outlook,” Kasman and his colleagues wrote. They saw the chance of the Federal Reserve keeping rates higher for longer dropped from about 50-50 to just a 30% chance. The economists see the Fed cutting the federal funds rate by 50 basis points in September and November.

JPMorgan is not the only bank taking a harder look at near-term conditions. Goldman Sachs upped its estimated probability of a US recession in the next 12 months from 15% to 25%, as revealed in a Sunday report for clients. Still, the economy looks “overall good”, and the risk of a recession is “limited,” the report said. The Federal Reserve also has room to cut rates in response if necessary.

In early July, Citi Research analysts predicted that the Fed would cut rates by 75 basis points in September and then continue more reductions during subsequent meetings until reaching 200 basis points in cuts because of concerns over economic trouble.