JPMorgan Billionaire Dimon Warns That Americans’ Pent-Up Savings Will Deteriorate—Fueling Recession Next Year

On CNBC’ s Squawk Box, Dimon pointed to consumer spending climbing 10% over the past year and 40% above prepandemic levels as a sign the U.S. economy is “the strongest in the world today,” with Americans holding on to $1.5 trillion in their bank accounts—over three times the prepandemic sum.

“We should celebrate that a little bit . . . but the other news is not good,” the chief of the nation’s largest bank (by assets) continued, saying higher interest rates and persistent inflation are “eroding everything . . . and that $1.5 trillion will run out sometime [in the middle of]

next year.”

As savings deteriorate, lower consumer spending “may very well derail the economy and cause the mild or hard recession that people are worried about,” Dimon said, citing geopolitical tensions and a possibility that the Fed starts lowering interest rates too quickly as two of the biggest risks facing the economy.

According to the Bureau of Economic Analysis, the personal savings rate has plummeted from a record high of more than 33% in April 2020—when the government started delivering more than $931 billion in stimulus checks to Americans—to just 2.3% in October, the lowest level in 17 years.

In a Monday note to clients, a Morgan Stanley team led by Lisa Shalett also warned of changing consumer habits, saying the spending spree that has kept consumer demand growing quickly this year “increasingly seems to be coming at the expense of savings and credit card balances,” with credit balances now exceeding a prepandemic peak.

Unless the labor market remains very strong next year, Shalett says the strong consumer spending will likely subside, further weighing on the economy, which has already seen recession odds “rising materially.”