The U.S. labor market is showing signs of stalling, with warnings that there may be no growth in workers over the next five years due to demographic factors and immigration policy changes. Job creation revised downward indicates trouble, with only 73,000 jobs added in July and a monthly average of 35,000. Unemployment rose to 4.2%, with a decrease in labor participation, translating to nearly 1.2 million fewer people engaged in the workforce. Aging demographics and lower participation rates pose significant challenges for the Federal Reserve regarding inflation and interest rate decisions.
With America's workforce in a demographic crunch and historic changes in immigration policy under way, it is "quite possible that the next five years will see no growth in workers at all."
The implications are profound for the Federal Reserve and for investors—chief among them, the need for exceptional caution before lowering interest rates.
Kelly highlighted that employers added just 73,000 jobs in July, well below the 110,000 consensus estimate, leaving the average monthly increase for the past quarter at a paltry 35,000 jobs.
The unemployment rate ticked up to 4.2% in July, as both employment numbers and labor force participation slipped further, indicating significant labor market challenges.
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