Oil Prices a Drag on Economy Despite Encouraging Signs: J.P. Morgan's Kelly

David Kelly, chief market strategist of J.P. Morgan Funds, hosted a call on Wednesday to address rising oil prices and political turmoil in the Middle East.

"Oil makes everyone very nervous," Kelly (left) began. Four of the major recessions since the 1970s have been preceded by spikes in oil prices, he said.

Oil is not inflationary in the United States, Kelly said, though it is in developing markets. In the United States, however, oil is deflationary because proceeds flow out of the country instead of to American producers.

There have been encouraging signs in the job market, Kelly told callers. For example, unemployment claims have declined, falling by 20,000 claims in the week ending Feb. 26, according to the Department of Labor. Additionally, the Conference Board Consumer Confidence Index rose 5.6 points to 70.4 in February and the percentage of consumers who predict fewer jobs will be available in the coming months fell from over 21% to 15.4%. And as if bad weather isn't bad enough, Kelly estimates more than 100,000 jobs weren't included in the January jobs report due to winter weather.

"If not for oil, you'd say the economy was moving up again," Kelly said.