JPMorgan Chase Chairman and CEO Jamie Dimon warns that the lingering government shutdown could wipe out growth from the world's biggest economy.
"Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero," Dimon told reporters on a media call to discuss fourth-quarter results, CNBC reported.
"We just have to deal with that. It's more of a political issue than anything else."
Dimon, who is also chairman of the Washington D.C.-based Business Roundtable, said that while the "underlying statistics for the economy globally are not bad," the bank will be prepared for the eventual downturn, CNBC reported.
"Consumers are in good shape, they're spending money, they're saving money, household formation is going up, wages are going up," Dimon said. "Eventually there will be offsets that may push the economy into recession, we don't know when that's going to be."
In the earnings release, Dimon addressed the U.S. political dysfunction that is now threatening to sap economic growth: In 2019, "we urge our country's leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment. Businesses, government and communities need to work together to solve problems and help strengthen the economy for the benefit of everyone."
The bank is "less concerned about the direct impact it may have on our fee performance, and more concerned about the impact it has on uncertainty and sentiment which can be pretty negative," CFO Marianne Lake said of the shutdown. "The more prolonged, the more customers are impacted, the more it's going to be hard to realize capital market fees."
However, Dimon was apparently much more optimistic just a week ago.
Dimon sees “decent growth” this year and said the recent stock-market plunge was just an overreaction.
"I think markets are overreacting to short-term sentiment around a whole bunch of complex issues," Dimon told Fox Business Network.
He interpreted the market moves as a "rational response" to slower growth and the U.S.-China trade dispute.
"My view is that the consumer is in good shape and is continuing to grow, and they have backwinds with jobs and wages going up," Dimon said, adding that consumers were paying back credit-card debts.
"I think you're going to have decent growth in 2019 in America," Dimon said. "Therefore sentiment might reverse course at some point in the future."
The U.S. economy slowed in the third quarter a bit more than previously estimated, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3 percent target this year, even as momentum appears to have moderated further early in the fourth quarter, Reuters reported.
Gross domestic product increased at a 3.4 percent annualized rate, the Commerce Department said on Friday in its third reading of third-quarter GDP growth. That was slightly down from the 3.5 percent pace estimated in October and well above the economy’s growth potential, which economists estimate to be about 2 percent.
The revisions to the third-quarter GDP reading reflected markdowns to consumer spending and exports. Inventory accumulation was, however, much bigger than previously estimated. There were downward revisions to business spending on equipment and nonresidential structures, as well as residential investment.
The economy grew at a 4.2 percent pace in the April-June quarter.
Meanwhile, a recent report from Ball State University warns that U.S. economic growth will slow this year amid a trio of factors.
The combined effects of 2018 Tax Cuts and Jobs Act (TCJA), current monetary policy, and a widening trade war will reduce the pace of nation’s economic growth in 2019, the new report from Ball State University said.
“While we expect the pace of U.S. GDP growth to be at or near 3 percent in 2018, we anticipate it slowing to 2.3 percent in 2019,” said Michael Hicks, director of Ball State’s Center for Business and Economic Research and an economics professor.
He also said the national economy is in its ninth year of expansion, with labor markets performing strongly, the unemployment rate is now beneath all common estimates of full employment, and wages have growth over the year of nearly 1.0 percent above the traditional consumer measures.
GDP growth in 2018 was stronger than in 2017, but not historically unusual, even for this relatively slow recovery. Promoting growth in 2018 was the Tax Cuts and Jobs Act, which motivated higher consumer spending, Hick said.