2018 Housing Summit
Jamie Dimon Optimistic for US, Global Economy
Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co., spoke candidly to business leaders about the US economic recovery, rising interest rates, technology and innovation, and what they could mean for business going forward.
On the Economic Recovery
America today is stronger than ever before. We have the best hand ever dealt: We have a prosperous economy, deep financial markets, free enterprise and freedom of speech, the best universities and military, and the most innovative companies and people in the world.
However, there are challenges. We’ve seen 2 percent growth—or 20 percent over the last nine years. A normal growth during an economic recovery of this length would be about 40 percent. Our uncompetitive tax system has driven a tremendous amount of capital overseas over the last 20 years. Limited access to credit, bureaucracy and high startup costs are crippling small business formation. There’s also an education crisis—half of inner-city students don’t graduate, and college education is one of our biggest exports, making it difficult to fill available jobs. Despite all of this, the US economy has been growing at a 3 percent annualized rate this year and is expected to sustain that growth for the remainder of the year.
On Rising Interest Rates
Interest rates are going to increase, at least to 4 percent. Rates are normalizing as a result of economic growth, which is a positive thing. Housing is in short supply, and household formation is going up. If there’s rising inflation, the Federal Reserve may raise rates more quickly than expected, which could lead to a recession.
Businesses should be prepared for a volatile rate environment and what may follow. All businesses have cycles, and people who can manage a down cycle are usually the victors. Companies that don’t react quickly, fail.
On China and Trade
There are legitimate concerns with our relationship with China: technology transfer issues, investment restrictions and an escalating trade war. The market is already responding to threats of new tariffs, and the impact on businesses could be detrimental. We could see a ripple effect on job creation, cost of goods and consumer confidence, among other things.
The debt-to-GDP ratio today is 76 percent of GDP. In the coming years, this will grow exponentially—and much of it can be attributed to Medicare and Medicaid expenses. Very soon, the government won’t be able to afford it. While the government contributes a lot to support healthcare, companies pay a lot, too. There are many factors contributing to these rising costs—chronic care, obesity, smoking, end-of-life care, overall health and lifestyle—and any long-term plan needs to address the different variables that go into supporting healthcare for Americans.
On Technology and Innovation
Technology is the greatest thing to happen to mankind. We’ve made unbelievable progress—and it’s all driven by technology. Technology causes disruption, which can be unsettling for businesses. But it can also help move the needle forward for problems that haven’t been solved yet, like education and healthcare. For businesses, technology will reduce costs and help you pass on the savings to your customers. Regardless of your industry, disruptions are coming—and you should plan for them.
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