The debate over whether the US economy will experience a “hard landing” or a “soft landing” has been a focal point for economists and businesses for some time. However, there may be a third option: not landing at all, continuing to soar in the sky.
US Treasury Secretary Janet Yellen stated on September 19 that the economy is showing key features of a soft landing, but she also warned against overconfidence, noting that “the economy always carries risks.”
Torsten Slok, Chief Economist at Apollo Global Management, told Bloomberg in an interview back in May that the debt-driven US economy will face a hard landing in 2025.
An article in The Wall Street Journal on October 12 suggested that the US economy may not be gradually or rapidly slowing down, but rather continuing to grow at a moderate or even better pace. Recent comments from bank executives imply that some recent signs of slowing down in consumer and corporate activities may reflect more of the past rather than the future.
Both JPMorgan Chase and Wells Fargo reported on Friday, October 11, that bank card spending growth has slowed down and there has been an increase in delinquent bank card payments.
While this might appear to indicate a slowdown in economic activity, Jeremy Barnum, CFO of JPMorgan Chase, mentioned that when considering spending data, the context of the pandemic and the period following it still needs to be taken into account.
He noted that after emerging from that challenging period, travel and entertainment spending saw a significant rebound; people embarked on many trips and booked cruises they hadn’t tried before. “Now that situation has normalized,” he said.
Normally, a decrease in this type of spending might suggest that people are shifting from discretionary to nondiscretionary items like gasoline or daily necessities, indicating that consumers are preparing for a potentially worse economic environment.
However, this is not the case with consumer data from JPMorgan Chase. The largest bank in the US did not observe a weakening in retail spending.
“Therefore, overall, we see consumption patterns as robust, in line with a solid consumer base, and consistent with a strong labor market and the core situation of the current economy not landing,” Barnum said.
Even customers who have been struggling with payments have reasons to anticipate an improvement. Charlie Scharf, CEO of Wells Fargo, stated to analysts on Friday: “The benefits of slowing inflation and easing interest rates should help all customers, especially those with lower incomes.”
The concept of the economy not landing implies more “flight”, as mentioned by the report.
As for the ultimate direction the US economy will take, there remains significant uncertainty. Jamie Dimon, CEO of JPMorgan Chase, warned on Friday that “while inflation is moderating and the US economy remains resilient, there are still several key issues, including massive fiscal deficits, infrastructure needs, trade realignment, and global remilitarization.”
Dimon added, “While we hope for the best outcome, these events and the prevailing uncertainty explain why we must be prepared for any scenario.”
Earlier this year, Dimon also sounded the alarm on the US debt situation, warning that with debt ballooning, the US is heading towards a cliff, suggesting that the “worst outcome” for the US would be stagflation. He has repeatedly cautioned that the US needs to address its debt issues to prevent more problems in the future, including inflation issues.