Business Leaders are more confident now than ever: JPM Survey

JPMorgan Managing Director and Head Economist for Commercial Banking, Jim Glassman, joins Yahoo Finance to discuss the JPMorgan Chase survey which expressed business confidence soaring and supply chains being the biggest concern in the market.

Video Transcript

MYLES UDLAND: A recent survey out of JPMorgan Chase indicates that 88% of middle market business leaders are optimistic about their firm's prospects over the next six months. Joining us now to talk a little bit more about the survey and the state of the economic recovery is Jim Glassman, managing director and head economist for commercial banking over at JPMorgan Chase.

Jim, thanks so much for jumping on this morning. So let's just kind of talk about the high-level takeaways out of the latest business leader outlook survey. And certainly the one that jumped out to me, highest level of optimism you guys have seen in the 11 years that you've been running this survey.

JIM GLASSMAN: Yeah, pretty impressive. And I think you can understand why. I mean, this is about the economy, not about the market. Business leaders know the markets go up and down day to day. These are the survivors that really got through the challenging time last year, were on the mend. The vaccination effort has helped. The latest variant isn't going to change that. There's just a greater danger for those that don't have the vaccine.

So you can sort of understand the optimism. And I think what's really interesting, when I look through, you can sort of see it's all over the economy. You can see it with the consumers as well. This crisis has forced people to figure out technology better.

And so you know what's really fascinating? If you look at retail sales, you hear all about how people have a hard time finding workers. But retail sales at restaurants are back to where they would have been, had there been no pandemic. And yet, there are fewer people working.

So I think what's happening, like everywhere else in the economy, our business leaders have figured out how to adapt, online channels, how to automate back-office systems. And they're learning how to do things-- provide the same service with fewer people.

Well, that's a real positive long term implication for everybody, including workers because what it might mean is that we need to have more GDP to get all those 8 million jobs back that we lost during the pandemic.

So I think it's really promising. And it's not just about happy talk from business leaders, by the way. They have some pretty ambitious growth agenda. And they're talking about capital spending and credit needs. But they're actually doing things that back up that optimism. And I think that tells you, from the economy's point of view, this is a pretty good story.

You can't be surprised because the economy's done a really good job recovering from the pandemic. And the markets, I think this is healthy what's going on in the markets. It's good to know that things don't always go up every day.

And the market's highly valued. We've not seen this kind of thing since the 1920s. And I think it's telling you something important about the world and about the economy.

JULIE HYMAN: Well, to segue to the world for just a second, Jim-- it's Julie here. We were just showing the results of the survey in different categories compared with last year and compared with the year before. The thing that really sticks out to me is how low the global economic expectations remain. They were low before. But they remain the low.

JIM GLASSMAN: But they've improved a lot.

JULIE HYMAN: They have improved. But how should we be thinking about the interconnectedness at this moment of the global economy? It feels like it matters a little bit less, even though it seems as though we still have that interconnectedness.

JIM GLASSMAN: I think it matters a lot, I think. The only thing is the US has been doing such a good job waking up from the pandemic, that that's what drives a lot of folks. But when we look at our clients, midsize businesses, 90% of them have some kind of exposure to the world around us. Some of it's outsourcing projects. But a lot of them, these are new markets.

In this survey, we found that more people, one of the things they were doing was to broaden their reach to other geographies. So when I talk about, you get the sense that people realize the world is interconnected. The pandemic is getting in the way a little bit because the others have not been as successful getting vaccinated. And we all know that we all depend on that.

But I was impressed that they're are a little less pessimistic than they were. But I think we're in a moment where it's hard to be that optimistic about what's going on around us because we still have this virus that countries are struggling with, including India, for example, and Asia.

MYLES UDLAND: Mm-hmm. And Jim, finally, I want to ask a little bit about the labor side of this because you see such interesting-- writing about your report this morning, kind of look back what we heard from the NFIB. And you talk to individual executives in various industries. And they talk about the challenge for hiring. And you were just mentioning earlier still that gap we have relative to the February 2020 employment level that we were at pre-pandemic.

I mean, how does the labor market heal itself? Or as you guys note in the survey, are retirements just going to set the post-pandemic participation rate a little bit lower, maybe than that 160-some-odd that we were at pre-pandemic?

JIM GLASSMAN: Maybe. But that's been going on for a while. The retirement issue really began to come on screen in 2008. That's when the baby boom generation began to move to retirement. I think right now, it's very confusing because businesses tell you they've got 9 million jobs they can't find people for. And yet, we know that there's a lot of people, folks we're having a hard time finding. But there's a lot of people who still don't have a job.

And I think part of the problem is in the early days of the pandemic, there were so many dislocations. People didn't have the money initially to pay the rent. So they might've gone back home. And so they've scattered around the country. And as restaurants, hotels, hospitality centers, fitness centers, as they all wake up, it takes time to get all of those people back in.

So I think time is important. And I think what's helpful-- the results of the survey are pretty promising for workers. But it tells you there's going to be lots of stuff you can do. And I think the most interesting story that comes through both the survey and contacts with clients, that everybody realizes that it's going to get harder and harder to find work.

So what are they doing about it? They're working harder to automate. Normally, would think, well, gee, if all these guys are automating, isn't that a problem for workers? We're cutting out jobs. But the problem is, the reason they're having to do it is because there aren't enough people. So when you go to the restaurant, for example, you're finding there's more technology in there. You might be doing some of the work.

And I think personally that if this is what's happening, that businesses are learning how to use technology and are thinking about automation to get around the fact that they can't find workers, then what's going to happen is the jobs on the site are going to be more interesting. They're going to pay more. There may not be as many jobs for a given establishment. But they're going to be more interesting jobs.

And when I listen to what's going on in the manufacturing sector, I think people are going to-- the possibilities for manufacturing are going to look a whole lot different than they did for all the kids that grew up in the Rust Belt days who didn't want to have to struggle with what their parents were struggling with.

And I think all of this points to a much better environment for workers and probably better pay as well.

MYLES UDLAND: Mm-hmm All right. We'll have to see how those trends play out in the years ahead. Jim Glassman, head economist at JPMorgan Chase Commercial Banking. Jim, really appreciate the time this morning. Thanks so much for jumping on.