The high -level analyst says that the next 5 years could see “no growth in workers” and sends a warning to the fate of the American economy

The implications, according to David Kelly, world chief strategist at JPMorgan Asset Management, are deep for the federal reserve and for investors – among them, the need for exceptional prudence before reducing interest rates.

Kelly used her regular research notes “notes over the coming week” to study the implications – perhaps assess the damage – of the shocking report on Friday, which revised the creation of jobs down in May and June by 258,000 jobs. In addition, employers added only 73,000 jobs in July, well below the estimate of the consensus of 110,000. This left the average monthly increase in the last quarter to 35,000 jobs. The unemployment rate reached 4.2% in July, because the number of jobs and the participation of the workforce still slipped.

Kelly also underlined the signs of sealing on the labor market, namely the drop in the work participation rate of 62.65% in July 2024 to 62.22% in July 2025. This translated in almost 1.2 million people under the age of 16 and who work or actively seek a job.

He awarded about half of this drop to retired Americans, but noted that the participation rate has also dropped among 18 to 54 year olds.

Kelly commented on these signs of tightness of work as a central context for the broader issue of labor supply in the economy, long -term trends involving that the Federal Reserve and the Chair Assisons Jerome Powell will face major challenges to fight against inflation in the future – which means that chances of all important prices for the fight against inflation.

The problem of workers in the economy

The aging population and the fall in the participation of work also speak to a deeper structural challenge that will persist well in the future.

According to the projections of the census, he noted that the population of the working age will in fact contract in the years to come without immigration returning to the previous levels.

Kelly underlines the prediction of the census that the population aged 18 to 64 would in fact fall more than 300,000 people during the year ending in July 2026, and would continue to fall roughly this rate until 2030. He notes that the retirement wave and recent changes in major immigration programs are even more borne by the supply of labor, which reduces potential growth.

Fed dilemma: inflation, growth and political pressure

This compression comes at a time when the federal reserve undergoes immense political pressure to reduce interest rates, President Trump and his allies calling for easier money to compensate for the effects of new prices and support the trigger markets.

However, Kelly argues that the central bank must work with caution, because the reduction of rates in a structurally tight labor market risks stimulating the inflation of wages and prices rather than accelerating economic growth.

He observed that the economic growth of the United States has reached an average of 2.1% per year since the beginning of the 21st century, largely driven by an annual increase of 0.8% of the workforce.

“From an almost fully fully employment point, given the continuous retirement of the baby boom and considering the possibility that the deportations and the voluntary departures of immigrants fully compensate for a new immigration in the coming years, it is quite possible that the next five years will not see any growth of workers from the whole,” he added.

If this happens, the economy will develop more slowly, predicted Kelly: “but will not be able to grow more slowly without lighting higher inflation. “”

For the Fed, the message is clear, he adds: being extremely careful about any rate drop. For investors, it is a warning to temper expectations for fast economic gains or a strong upturned market motivated by easy money. In other words, American “exceptionalism” is not obvious, in the future.

Investors, said Kelly, “should no longer bet largely on an American economic tide on the rise or a drop in interest rates.”

For this story, Fortune Used a generative AI to help an initial project. An editor checked the accuracy of the information before the publication.