NEW YORK (WNI) — JPMorgan Chase CEO Jamie Dimon said this week that the U.S. economy was facing an “economic hurricane” in the near future, urging the Federal Reserve to take more drastic measures to tame rampant inflation.
Despite rising costs for American households, the U.S. economy has continued to maintain a strong jobs performance, however a number of global economic shocks are on the horizon along with continued supply chain issues that could sustain higher inflation rates for a longer period.
According to Dimon, the CEO for JP Morgan Chase at a banking conference on Wednesday said that the situation people were facing at present was unprecedented, and that it was unclear as to how severe things could become down the road.
Reiterating the focus should be for the Fed to raise interest rates, Dimon went further to say “they have to do QT. They do not have a choice because there's so much liquidity in the system.”
With the prospect of rising interest rates, borrowing costs for American families are predicted to steadily increase within the coming months ahead, but even with raised interest rates, additional global shocks could still lead to higher, longer term inflation. Global shocks such as the imminent wheat shortage due to the war in Ukraine, the gas and oil embargo on Russia as well as oil output issues at home and within OPEC could lead to further cost rises that are currently hard to forecast.
CNN reported that energy officials this week were warning the world was rapidly heading towards a potential 1970s style energy crisis which could endure. With uncertainty around the Russia-Ukraine conflict, and the potential supply chain issues continuing to affect global trade later this year, the U.S. may have yet to feel the full effects of multiple crises.
In one troubling sign for the U.S. economy, small businesses have shed nearly 300,000 jobs since the start of the year. This was particularly evident for businesses with fewer than 50 employees, however part of this was due to the ‘mass resignation’ following the pandemic and companies facing difficulties with hires as workers demanded more flexibility and pay. However, with increased Fed tightening on the horizon, companies and startups with more debt exposure could start to reign in hires, and be forced to make more drastic cuts. This could be exacerbated by falling investor confidence where financing gets difficult or loans become more expensive.
For now, the U.S. labour market remains tight, with no immediate sign of a downturn, but emerging global shocks could change this picture within the months ahead.