JPMorgan Chief Economist Bruce Kasman expressed cautious optimism about the state of the U.S. economy during an interview on Monday, suggesting that an economic recession was unlikely in 2022 and that listeners have little reason to fear the current economic slowdown.
“There’s no real reason to be worried about a recession,” the economist said during an interview with Bloomberg. “I think you'd have to get hit by much bigger shocks to really talk about recession anytime in the next 12 months or so.”
The JPMorgan economist expressed a tepid optimism about the global economy, claiming that he expected to see slow but steady growth in the third and fourth quarters of 2022, driven by what he described as “a very healthy private sector.”
The word “recession” has come into common use among economists, journalists, and business leaders in recent months, as the Federal Reserve undertakes a regimen of rate hikes and quantitative easing which coincides with major losses in the stock market.
One of the silver linings of the current economic situation is a relatively low unemployment rate, following a period of rapid improvement from a record high of 14.8 percent in April 2020. This is in contrast to previous periods of high inflation such as that of the 1970s when high unemployment rates left the Fed’s hands tied as it attempted to ameliorate the devaluation of the U.S. dollar.
“I think there’s a huge difference between a slowdown and a recession. We haven’t had a recession in the U.S. without the U.S. unemployment rate rising 2 percentage points or more,” Kasman noted further in the interview.
‘Hawkishness’
Furthermore, there is reason to believe that the Federal Reserve’s hawkishness on inflation has already peaked (without a yet-apparent detriment to employment), according to JPMorgan global strategist Marko Kolanovic.“We have potentially passed peak Fed hawkishness and this is expected to be joined by a likely peak in inflation, on a yoy change basis,” Kolanovic wrote in a note to investors. “The investor outlook with respect to growth momentum has come down aggressively, limiting the potential for a disappointment from here.”
If Kolanovic is correct, this could prove a boon to the stock market in the coming financial quarters, with the potential to facilitate further economic growth at the expense of higher inflation. This is the bind in which the Fed finds itself as it navigates the uncharted waters of the 2020s economy, in which competing concerns over inflation and overall economic growth leave the central bank in a delicate situation.
