Everything is still fine, apparently
Although economic storm clouds are everywhere, it has yet to rain.
Why it matters: The market has been pricing in the growing risk of a recession as inflation continues to soar.
- But businesses are in good shape and consumer spending — the backbone of the U.S. economy — remains strong because workers have more income and "jobs are plentiful," according to JPMorgan CEO Jamie Dimon.
Driving the news: Americans are spending 10% more than they did last year and about 30% more than 2019, Dimon said this morning on a call with analysts as he reviewed second quarter results. (They fell short of Wall Street expectations.)
- On the same call, CFO Jeremy Barnum noted that the country's biggest bank has "yet to observe a pullback in discretionary spending, including in the lower income segments."
By the numbers: Travel and dining spending jumped 34% over last year, Barnum said, as consumers shifted their demand from goods to services this year.
- Combined credit and debit spending is up 15%, he added.
Yes, but: Inflation is eating into take-home pay, making more rely on credit cards, which may dent growth going forward.
- Real average hourly earnings dipped 1% from May to June, and 3.6% from June of last year to this year, according to government data out this week.
What they're saying: "The most important indication for the economy over the next few weeks will [be] earnings releases as companies report," Gargi Chaudhuri, head of BlackRock's iShares Investment Strategy Americas, wrote earlier this week.
- Specifically, Chaudhuri and her team will be keeping an eye on which companies can continue to pass high prices onto consumers, and which sectors are revising forecasts lower.
The big picture: "Even if we go into a recession, [consumers are] entering that recession with less leverage, in far better shape than they did in '08 and '09, and far better shape than they did even in 2020," Dimon said.