Jim Glassman is the managing director and head economist for commercial banking at JPMorgan Chase & Co., which is in the process of opening its first retail banking branches in the Boston-Providence market. He is a long-standing participant in the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters and the National Association of Business Economists’ panel of macroeconomic forecasters.
From 1979 through 1988, Glassman served as a senior economist in the Research & Statistics and Monetary Affairs departments at the Federal Reserve Board in Washington, D.C. He joined Morgan Guaranty in 1988 and Chemical Bank in 1993, which through a combination of mergers became JPMorgan Chase & Co.
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He earned a bachelor’s degree from the University of Illinois Urbana-Champaign and a master’s degree in economics from the University of Illinois Chicago. He was awarded a doctorate degree in economics from Northwestern University.
PBN: Is the market for commercial banking expanding?
GLASSMAN: The market for commercial banking appears to be expanding because the rising national tide has also benefited small and midsized businesses, which tend to rely more on traditional banking for financing than the larger businesses do. This trend is visible in the gradual strengthening of bank lending for commercial and industrial purposes.
PBN: Do you see the economic stimulus fading this year from the corporate tax cuts enacted last winter?
GLASSMAN: The benefit of corporate tax cuts is far more profound than the impact they have had on economic growth in the past year. This is due to the fact that they have realigned the U.S. corporate tax code with the tax systems of most other economies, so they’ve addressed an issue that was creating many tax-related distortions.
But the push from last year’s fiscal initiatives, including spending boosts and tax cuts for individuals, probably won’t be as strong this year as it was last year, so economic growth is likely to slow from last year’s pace.
With unemployment near lifetime lows, this would be a favorable outcome because it would lessen the risk of inflation imbalances and lengthen the life expectancy of the current economic expansion, which is already the second-longest expansion in recorded U.S. history.
PBN: What do you see happening in the labor market this year?
GLASSMAN: JPMorgan Chase’s 2019 Business Leaders Outlook report showed that midsized businesses rank the limited supply of talent as their top challenge. What these companies said they’re planning to do about it, according to the report – raising pay and full-time staff and boosting in-house training programs – is good news for workers, who can continue to see gradual improvement in conditions and pay.
However, the pace of job creation sustained over the last eight years can’t go on forever, and as full employment arrives, a slowdown in job creation will be necessary to prevent overheating and prolong the economic expansion. Through the remainder of the business cycle, economic growth will be driven by the worker productivity gains resulting from investments in productivity-enhancing technologies.
PBN: Which areas of lending and investing do you see having the greatest potential for producing speculative bubbles?
GLASSMAN: There are no obvious signs of speculative conditions fueled by credit expansion. Concern about potential excesses in inherently uncertain areas, such as leveraged lending, seem to ignore that investors are familiar with the potential risks and are pricing the credits appropriately. That is why long-term credit costs for noninvestment-grade borrowers in the aggregate are almost 500 basis points higher than those for the U.S. Treasury [Department]. This is quite different from the easy credit conditions that contributed to last decade’s housing speculation.
PBN: You said there aren’t signs of an impending recession this year. But what about JPMorgan Chase’s projection for a downturn in 2020?
GLASSMAN: Economic expansions don’t last forever, but none of the red flags that have triggered recessions in all of the U.S. recessions since the 1860s is present. The red flags of inflation and other financial imbalances are notably absent.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
