America’s economy is staring down a serious demographic crisis that could sap its strength for years — and one of Wall Street’s most respected economists says the warning signs are flashing red, Fortune reports.

“It is quite possible that the next five years will see no growth in workers at all,” warns David Kelly, chief global strategist at JPMorgan Asset Management. “If that happens, this economy will only be capable of growing more slowly — unless we want to stoke the fires of inflation.”

In other words, America’s workforce — the very engine of economic growth — will continue to shrink for at least the next five years, and that doesn’t even factor in the effects of artificial intelligence on jobs.

A Vanishing Workforce

July’s dismal jobs report exposed what Kelly calls a structural crisis. Job creation for May and June was revised down by a massive 258,000 jobs, and July’s gains came in at a tepid 73,000 — far below expectations. The unemployment rate ticked up to 4.2%, while labor force participation also slipped.

The average monthly increase for jobs in the second quarter was a measly 35,000 jobs.

Buried in the numbers is a troubling reality: Fewer Americans are working or even looking for work. In fact, the labor participation rate has dropped from 62.65% in July 2024 to just 62.22% today. That’s nearly 1.2 million fewer working-age Americans age 16 and older engaged in the economy.

“Roughly half of this decline is due to Baby Boomers hitting retirement age,” Kelly said. “But what’s more worrying is that participation is also falling among younger adults, those between 18 and 54. That’s not a temporary problem — it’s a structural one.”

And the future looks even grimmer. Citing U.S. Census Bureau projections, Kelly noted that without a major rebound in immigration, the working-age population is on track to shrink by over 300,000 by July 2026 — and keep declining at this or a potentially higher rate through at least 2030.

Immigration, Retirement & Monetary Policy

“Retirements are only part of the problem,” Kelly explains. “The other major factor is immigration — or the lack of it.”

Under the current administration’s tougher stance on border enforcement, changes to key visa programs, and the potential for increased deportations, the labor supply is drying up.

While border security remains essential, Kelly warns that if net immigration falls to zero — or worse, turns negative — America won’t be able to replace its aging workforce. “If deportations and voluntary departures offset new immigration, then we’ll see no labor force growth at all,” Kelly said.

That’s a formula for stagnation, and it directly threatens the growth of the economy and the health of the stock market.

“Investors should no longer bet broadly on a strongly rising U.S. economic tide or lower interest rates,” he warned.

In other words, American exceptionalism is not a given.

Lower GDP: Tepid Markets, Higher Risk

The stakes for America’s economic trajectory are clear: fewer workers mean lower productivity, slower GDP growth, and weaker corporate profits.

Kelly points out that U.S. growth since 2000 has averaged just over 2.1% annually, driven in large part by a modest 0.8% yearly increase in the workforce. Without any growth in workers, the math simply doesn’t add up. “There is no way to maintain that pace unless productivity somehow accelerates dramatically — which is unlikely without a robust labor market,” he said.

And this has profound consequences for investors. “Don’t expect a repeat of the past decade’s stock market boom,” Kelly cautioned. “Low labor force growth means lower economic momentum. That’s not the environment where you see soaring returns.”

Fed Must Proceed With Caution

Meanwhile, the Federal Reserve is under growing pressure to cut interest rates, especially from President Donald Trump and other political leaders eager to juice the economy ahead of the 2026 election.

Kelly believes the Fed must resist.

“Cutting rates now would risk igniting wage and price inflation without actually solving the deeper workforce problem,” he said. “We’re at full employment. This isn’t about boosting hiring —I t’s about capacity. And right now, we’re running out of it.”

The central bank, Kelly argues, needs to be extremely cautious. “The biggest mistake they could make is to assume that low job growth means the economy is weak. In reality, it may just mean we’ve run out of people to hire.”