Jeremy Barnum: Yeah. So on the central scenario, you should read the research that gets put out by our competitors and our excellent research team. No, but in all seriousness, I think our US economists had their central case outlook to include a very mild recession with, I think, two quarters of negative 0.5% of GDP growth in the fourth quarter and first quarter of this year. And that then got revised out early this quarter to now have sort of modest growth, I think, around 1% for a few quarters into 2024. So just flowing that through our process while acknowledging that we’re still skewed to the downside, we’re still reserved to a significantly higher unemployment rate on a weighted average basis than is in the central case outlook.
So that number we’ve sometimes given you is 5.5% this quarter. So it’s really not much more complicated than that. We’re just kind of following the process. And I think your other question was, where am I seeing softness in credit. And I think the answer to that is actually nowhere roughly or certainly nowhere that’s not expected, meaning we continue to see the normalization story play out in consumer more or less exactly as expected. And then, of course, we are seeing a trickle of charge-offs coming through the office space. You see that in the charge-off number of the Commercial Bank. But the numbers are very small and more or less just the realization of the allowance that we’ve already built there.
Ebrahim Poonawala: That’s helpful. And just going back to the details you laid out on Basel endgame. Maybe on the philosophical side, I think Jamie was speaking last month said, doesn’t — we don’t expect any changes. But at the same time, you make everything that makes sense in terms of the pushback. Is it all falling on deaf ears from a shareholder perspective? Are we resigned to the fact that we are going to see more towards the worst-case outcome play out? Or is there some level of sort of meeting in the middle of the road as this thing gets finalized?
Jeremy Barnum: Yeah. So I’ll let Jamie speak for himself on that point, but our job is to advocate. We’re not going to guess what the sentiment is in Washington. It’s a 1,000-page rule proposal as you know. We’ve got a big team of very smart people studying it very closely. Interestingly, we noted recently that in some of the analysis that they did about the impact on lending, they sort of forgot about like $1 billion of the Fed and their preamble, they forgot about $1 billion of operational risk RWA. So it just highlights that there is a possibility or seem to have forgotten. They simply omitted the impact of the operational risk RWA on fees. So anyway, the point is it’s long, it’s complicated, it’s technical. We do think there are probably some technical mistakes and they are going to forcefully advocate on all of those.
And while we disagree with a lot of this stuff, these are technical issues that should be, in some sense, resolved technically. And hopefully, they’ll listen.
Ebrahim Poonawala: Got it. Thank you.
Jeremy Barnum: Sorry, I’m just getting a correction in the room. I meant to say trillion.
Ebrahim Poonawala: Yeah, no, I got that. I got the trillion dollars. Yep. [indiscernible] Thank you.
Operator: Thank you. Our next question comes from Ryan Kenny with Morgan Stanley. You may proceed.
Ryan Kenny: Hey, good morning. I want to dig in on the NII side. So you raised the 2023 NII markets guidance by $2 billion for this year. So I know your comments in the press release suggests JPMorgan’s overearning. So I just want to triangulate there. What does normalized NII look like? And do we get to normalize next year or later on?
Jeremy Barnum: Yeah, a couple of things. So let me do the timing question first. So we’re being very clear that we are not predicting when it’s going to be a function of the marketplace and the rate environment and competitive dynamics and so on and so forth. So we’re just really just trying to remind everyone not bank on the current run rate, which we just don’t fundamentally think are sustainable. You’ll be aware that before Investor Day last — earlier this year, we tried to quantify what we thought that kind of normalized range might look like, and we put a sort of mid-70s type number out there. And at Investor Day, we talked about how the acquisition of First Republic was going to push that number up a little bit, although there were some overlaps and so on and so forth.
So anyway, with the benefit of time and having everything settled in a little bit, if you sort of push us for that kind of what does that number now look like, we think it’s probably closer to about 80 with all the obvious caveats that this is a guess and we don’t know when. But we’re just trying to point out that it’s a bit lower than the current run rate.
Ryan Kenny: Got it.
Jamie Dimon: Inside the company, some people think it will happen sooner, i.e., me. Some people think it will happen later, i.e., Jen and Marianne and Jeremy.
Jeremy Barnum: There was no way that I was in that camp, actually, but I don’t know. I’m not sure I have an opinion on it.
Ryan Kenny: And then on the loan growth side, industry loan growth has slowed significantly this year. What demand are you seeing for loan growth across the different categories? And I know it might be too early to talk about next year, but directionally, how should we think about loan growth, given where we are in the cycle and the higher capital requirements coming?
Jeremy Barnum: Yeah, sure. So on loan growth, the story is pretty consistent with what we’ve been saying all year. So we were seeing very robust loan growth in Card, and that’s coming from both spending growth and the normalization of revolving balances. As we look forward, we’re still optimistic about that, but it will probably be a little bit more muted than it has been during this normalization period. In Auto, we’ve also seen pretty robust loan growth recently, both as a function of slightly more competitive pricing on our side as the industry was a little bit slow to raise rates. And so we lost some share previously, and that’s come back now. And generally, the supply chain situation is better. So that’s been supported.
As we look forward there, it should be a little bit more muted. And I think generally in wholesale, the loan growth story is going to be driven just by the economic environment. So depending on what you believe about soft landing, mild recession, no lending, we have slightly lower or slightly higher loan growth, but in any case, I would expect it to be relatively muted. And of course, Home Lending remains fairly constrained both by rates and market conditions. But also, and I think this is true across the board, we will be managing things actively as mentioned in light of Basel III, which may not change originations, but it will change what we retain.
