Economic Statistics Are Stuck in Neutral, But for How Long?

Some of this is surely coincidence, and of course many economic and especially financial-market indicators are anything but flat. Still, there are reasons to suspect something is afoot. The main one is that population growth has flattened, and over the long run population growth is a chief driver of economic behavior. Other forces tend to predominate over the shorter term, but right now they may be stalemating one another to make some usually cyclical indicators look not very cyclical at all.

This has to give way eventually to lines that go up or down. The majority view among market professionals seems to be that the next moves will be in a more positive direction. The public at large is, according to consumer confidence surveys, either somewhat or extremely pessimistic. I do think that the longer the lines stay flat the more credible the pessimistic view gets.

Let’s look at some more of those flat lines. The most important is the US population younger than 65, chosen here because it (1) is more relevant to the present and future of the labor market than total population, (2) stopped growing a decade ago and (3) is projected to stay roughly flat for the next four decades, after which it will decline.

The Census Bureau’s most recent population projections came out in 2023 and were based on population estimates from 2022, before the 2022-2024 immigration wave drove a 2.3-million-person increase in the estimated under-65 population not foreseen in the projections. That increase has been partially reversed since 2024 and seems unlikely to have much impact on the longer-run outlook. Future immigration policies and birth rates will have an impact, but decades of zero under-65 population growth seems like a pretty reasonable baseline forecast.

The headline economic statistic most directly affected by this population stall-out is nonfarm payroll employment. After growing at a 1.2% annual pace over the previous decade, US payrolls are up just 0.2% annualized since President Donald Trump started his second term in January 2025. Some economists now estimate that — because the working-age population isn’t growing — the breakeven pace of jobs growth needed to keep the unemployment rate steady is close to zero.

Nonexistent population growth thus partly explains the lack of payrolls growth, and together they partly explain the steady unemployment rate. But unemployment also usually rises and falls with the business cycle — as do the prime-age employment-population ratio and the quits rate, which have also been relatively steady recently (as have hires, initial unemployment claims, average weekly hours and a few other employment statistics, but I didn’t want to overload the chart).

After the extremes of Covid-19 layoffs and the widespread labor shortages that followed, some sort of pause as employers, workers and would-be workers figured out what came next was to be expected and even welcomed. But as that pause enters its third or fourth or even fifth year (depending which measure you’re looking at), one has to wonder why. One possible explanation is the spread of large-language models into the workplace, which has already displaced some workers and generated much uncertainty about where LLMs and other artificial-intelligence technologies might take us next. The chaotic economic and foreign policies of the Trump administration have also put business decision-makers on a back foot, incentivizing wait-and-see behavior for many.

Outside the job market, housing sales provide perhaps the clearest visual evidence of an economy stuck in low gear, but auto sales, industrial production, real retail sales and Treasury yields have been been flatter than usual, too. All have also been giving hints of an uptrend lately, although retail sales surprised to the downside on Friday and 10-year yields have drifted slightly downward since the end of July.

High interest rates have been a constraint on home sales, with 30-year mortgage rates more than double what they were five years ago. But the booming stock market and stable job market have been pushing in the opposite direction, keeping sales from sliding further. Upon launching his new housing-commentary endeavor last week, Bloomberg Opinion alumnus Conor Sen declared that the positive forces were starting to prevail and “the housing recession is over.” Given his track record, I hesitate to argue with that. The Wall Street Journal’s Greg Ip, who is also a lot smarter than I am, wrote last week that the US is now in a “jobless boom” in which employment doesn’t grow but economic output and wealth do as AI begins to drive big increases in productivity.

These are scenarios in which at least some of the indicators discussed here start showing signs of positive change, which is reasonable enough. But stock prices don’t always go up, and technological change seldom proceeds in a smooth line. The transformative wave of high productivity growth that economist Robert Gordon dates as running from about 1920 to 1970 in the US didn’t stop the economy from falling into a Great Depression in the 1930s. That’s warning enough to keep an eye on those flat lines to see what they do next.

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Read more articles by Justin Fox