BLOOMBERG, MAY 26, 2020
JPMorgan CEO Jamie Dimon says unemployment could drop to 10% by year-end
By Michelle F Davis for Bloomberg – Jamie Dimon sees “pretty good odds” of a fast economic rebound starting in the third quarter thanks to the U.S. government’s stimulus programs and the strength of the consumer going into the pandemic.
“You could see a fairly rapid recovery,” the JPMorgan Chase & Co. chief executive officer said Tuesday at a virtual conference hosted by Deutsche Bank AG. “The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive.”
Dimon, who runs the largest U.S. bank, pointed to economists’ forecasts that show unemployment spiking to around 18% this quarter, then falling to 14% in the third quarter and declining to about 10% or 11% by the end of the year.
In response to the crisis, the Federal Reserve has effectively cut interest rates to zero, pumped trillions of dollars into the economy and announced plans for nine emergency lending programs, including support for small businesses. The jobless rate more than tripled in April to 14.7% as employers cut an unprecedented 20.5 million jobs.
Dimon said he thinks the Fed did the right thing in acting quickly and with what he referred to as “increasingly strong actions.”
“This wasn’t the bazooka,” he said. “The Fed took out the whole military and applied it. Just announcing these programs reduced spreads in the market. It’s going to save a lot of small businesses” and it’s “helping people avoid stress.”
Many states have begun the process of easing restrictions on businesses put in place to slow the spread of Covid-19, and “you’re already seeing the positive effects of the opening-up taking place, at least for the economy,” Dimon said.
Shares of the bank surged 7.9% to $96.52 at 2:55 p.m. in New York, the biggest increase in more than a month. They’re down 31% this year.
Under JPMorgan’s base-case scenario, banks might not need to add to credit reserves for the rest of the year, after boosting them substantially this quarter, he said. “You’re going to know a lot more by the end of the third quarter,” when the first round of forbearances and mortgages comes due, he said.
Dimon pointed to data that show roughly 33% of those who asked for forbearance on home loans didn’t use it.
“A lot of people who asked for it — even those who used it — did it as a safety precaution,” he said. “It’s a healthier consumer. You see that in underlying delinquencies. It’s completely different from a consumer standpoint” than during the financial crisis in 2008, he said.
Dimon warned that a prolonged downturn is still possible.
“If it does go on for a year, it won’t be very good,” he said. “You can’t prop up the stock market forever.”
In the wide-ranging interview, Dimon also said he thinks the pandemic will accelerate the trend of people working remotely. More than 180,000 employees, or roughly 70% of the bank’s global staff, are working from home to help stem the spread of the deadly coronavirus. JPMorgan has told workers they’ll be brought back to offices in waves and that it plans to keep buildings at no more than 50% capacity for the foreseeable future.
Contrary to some forecasts, Dimon doesn’t see the pandemic necessarily accelerating the digitization of banking, which he said was already happening. Internal data have shown that customers who tended to use digital channels did so increasingly during the pandemic, but “folks that aren’t digital aren’t exactly picking it up,” he said.
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