"We are in a boom, but all booms are over, and this high level of production and employment can not be sustained," he told CNBC's Martin Soong on Sunday at China Development Forum in Beijing.
Phelps won the 2006 Nobel Prize in Economics for his work on the short-term and long-term effects of economic policies.
"I would be surprised if the increased investments last even longer, maybe another year, maybe two years," he said. "I think we will adjust to a more normal level of employment and unemployment."
The US Federal Reserve has warned that the United States will grow more slowly this year than last year.
The central bank said weaker European and Chinese economies are slowing US growth. It is estimated that the US economy would grow by 2.1
Some analysts have even predicted that the US could be in recession by the middle of next year.