'No Growth In Labour Force For Next 5 Yrs': JP Morgan Analyst Warns Amid Immigration Curbs, Weak US Jobs Data
With this, the US Federal Reserve will need to maintain exceptional caution before lowering interest rates, the analyst said.
A top JP Morgan analyst has warned that the US labour force may see no growth over the next five years, citing factors such as former President Donald Trump’s significant changes to immigration policy.
It is “quite possible that the next five years will see no growth in workers at all,” David Kelly, chief global strategist at JP Morgan Asset Management, was cited as saying by Forbes.
As a result, the US Federal Reserve will need to maintain exceptional caution before lowering interest rates, he said. In his latest 'Notes on the Week Ahead,' Kelly highlighted the impact of the recently released US jobs report.
On Friday, the US Labour Department reported that payrolls grew by just 73,000 last month. This figure is well below the estimates of about 1,00,000. May and June’s job figures were also sharply revised downward, signalling a much weaker labour market.
The gains in May were lowered from 1,44,000 to 19,000. June’s gains were cut from 1,47,000 to 14,000, removing a total of 2,58,000 jobs. After these changes, the US added only about 35,000 jobs per month on average over the last three months, the report added.
Commenting on the tight US labour market, Kelly attributed it partly to an aging population moving into retirement, as well as a drop in participation among those aged 18 to 54.
Citing Census projections, the analyst noted that the population aged 18-64 years would decline by over 3,00,000 in the year ending July 2026. This trend is likely to continue till 2030.
According to Kelly, this indicates a long-term supply issue, signalling major challenges for the Fed in fighting inflation. This could mean slimmer chances of rate cuts, which Trump has been aggressively pushing for.
Kelly further noted that these demographic trends, combined with tightening immigration policies, will significantly strain the labour market. This is set to have an impact on sustaining economic growth.
According to Kelly, US economic growth has averaged 2.1% annually since 2000, largely due to a 0.8% yearly increase in the workforce.
“Starting from a point of roughly full employment, given the continued retirement of the baby boomer generation and considering the possibility that deportations and voluntary departures of immigrants entirely offset new immigration in the next few years, it is quite possible that the next five years will see no growth in workers at all,” he was cited as saying.
