The U.S. labor market could potentially see no growth in workers over the next five years, warns David Kelly, chief global strategist at JPMorgan Asset Management.
Labor Shortage Deepens As Retirements And Policy Bite
According to Kelly, demographic changes and shifts in immigration policy are causing a significant crunch in America’s workforce, reported Fortune.
He attributed about half of this decline to Americans entering retirement, but also noted a drop in participation rate among those aged 18 to 54. Kelly sees these signs of labor tightness as crucial context for the broader question of labor supply in the economy. The strategist’s concerns have significant implications for the Federal Reserve and investors, particularly the need for “exceptional caution” before any interest rate cuts.
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The warning was issued in Kelly’s regular “Notes on the Week Ahead” research note, which also analyzed the impact of the recent disappointing jobs report. "Quite possible that the next five years will see no growth in workers at all,” wrote Kelly.
The unemployment rate rose to 4.2% in July, with both employment numbers and labor force participation slipping. Kelly highlighted the decline in the labor participation rate from 62.65% in July 2024 to 62.22% in July 2025, equating to nearly 1.2 million fewer people aged 16 and over working or actively seeking employment.
Economists Raise Recession Alarm On US Economy, While Corporate Earnings Strengthen
This warning comes on the heels of a string of economic concerns. Economists have expressed concerns about the US economy nearing ‘stall speed’ and potentially tipping into a recession. The disappointing July jobs report, with downward revisions for May and June, has added to these fears.
In addition, Moody’s Analytics Chief Economist Mark Zandi warned that the American economy stands "on the precipice of recession" following last week's disappointing economic data releases.
Despite these concerns, corporate earnings have shown signs of strength, suggesting a contrasting narrative. Ed Yardeni, President of Yardeni Research stated, he said, “Yes, firms are pausing hiring, but they’re not cutting,” noting that third-quarter GDP, based on the Atlanta Fed model, remains on track at 2.1%, with consumer spending rising by 1.6%.
However, the labor market’s potential stagnation could have significant implications for the Federal Reserve’s monetary policy and the broader economy.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
