Why do American supermarkets only carry lamb and not mutton?

It's not just American supermarkets that rarely carry mutton, this situation is similar across the Anglosphere, and I suspect most Western countries too (or at least those without a strong mutton culture). The reason is largely economic. Mutton is expensive and not as tasty as lamb.

• First, the immediate reason is that nobody really eats mutton anymore. Yes, there are certain locales, cultures and movements still eating mutton or are trying to bring it back, but today, on aggregate, the demand for mutton is near zero. According to the USDA:

  The U.S. market for lamb and mutton has weakened throughout the decades. Since the 1960s, per capita consumption has dropped from nearly 5 pounds to just about 1 pound. This drop is due in part to declining acceptance of lamb from a growing segment of the population, as well as competition from other meats, such as poultry, pork, and beef. Most meat is sold as lamb and comes from animals under 14 months old.

  Here's a per-capita consumption graph:

  

  If nobody buys mutton, supermarkets don't sell them. The supply chain for meats is pretty complex; it's not something that a store manager can just decide one day to order a batch and shelve to see if it sells. Meat needs to be slaughtered and deboned in an abattoir, butchered either in store butcheries or at centres (unless you fancy buying an entire, 50kg cut), and displayed in refrigerated sections. If there's enough local demand for mutton then maybe individual supermarkets can carry them, just as meats like rabbit, duck or kangaroo is sometimes sold at a few supermarkets.

• But why don't people eat mutton? People just don't like it. It is an inferior good.

  Mutton comes from older animals and is often less expensive but less desirable to consumers. (USDA)

  .

  As can be seen, the average income elasticities across the studies are 0.77 for beef, 0.24 for lamb, -0.65 for mutton, 0.47 for chicken and 0.48 for pork.

  (Negative income inelasticity = inferior good) That is, as incomes grow, as they have over this timeframe, people want to buy less of it.

• Lamb is a superior substitute for mutton. Anecdotally, compared to lamb, mutton is gamier, tougher, and harder to cook. Economically, lamb and mutton have high cross-price elasticity - if one's price grows, demand shifts to the other, indicating that they are substitutes. And the real killer is...

• Mutton prices have grown faster than lamb.

  

  Mutton is still cheaper than lamb, but in relative terms it has become more economic to raise and sell lamb. There are multiple market forces at play: the cost of raising the sheep past lamb age, the efficiency of raising lambs (i.e. increased lamb weight), the growth of dairy leading to higher beef supply, the relative decline in wool reducing mutton supply and so on. You'll have to ask a farmer.

Source: Changing Pattern of Meat Consumption in Australia by Lucille Wong, E A Selvanathan and Saroja Selvanathan

Update: didn't notice that the graph was price indices and not actual prices

As has been mentioned, most of the lamb in the US is imported -- and mutton is imported, too

There's a giant consumer of mutton in western Kentucky around Owensboro. (it's the local standard for barbecue, and past reports put Owensboro near the top of the list for both for per capita number of and spending at restaurants)

As we now have a lot of smaller sheep farms making cheese and wool, especially in mountainous regions, I would suspect that there are people eating mutton, but it may be that they're keeping it for themselves. There's also a possibility of selling it to ethnic butchers, as sheep and goat are popular in some european, asian and middle eastern cuisines. (I know I can get rabbit at one of the local Italian markets, and goat at a local asian market)

Although I suspect that there may be some labeling issues in selling mutton as 'lamb' (much like people would be upset if you sold beef as veal), I've heard that some butchers who make Merguez sausage will use a blend of mutton and lamb -- the spices mask the possible gaminess of the mutton, but there's still lamb in it so they can label it as such.

I'd suggest looking in your area to see if there are large farmer's markets -- there are often farmers selling meat, cheese, and yarn there. If you find someone selling sheep products, you can ask them about obtaining mutton or hogget (1 to 2 year old sheep).

Here in New Mexico, the Navajo raise sheep, and eat a lot of mutton. It is definitely an acquired taste; pretty "gamey" to me. Nearly all the lamb sold in stores here is from New Zealand or Australia. It is not possible to find mutton in regular stores here. I have never seen mutton sold as lamb; I don't think it would sell, except near a reservation, and there would be issues about false labelling. You can definitely tell the difference - even by sight - between mutton and lamb. I have also lived on the East Coast and the West Coast (but over a decade ago) and I have never seen mutton for sale in stores.

The answer is #1.

There is no term for Hogget or Mutton in North America. All meat from a sheep is called 'lamb' regardless of its age. So likely, all lamb sold in the US would be called mutton elsewhere. (It is possible that it is all actually young sheep, or some is young some is old -- but I doubt it.)

Relevant regulation:

Under current federal regulations (2014 CFR §65.190), only the term 'lamb' is used:

Lamb — ovine animals of any age, including ewes and rams

The terms 'mutton' and 'hogget' are rare in the United States. Nevertheless, the exclusive use of 'lamb' in the United States may be confusing, particularly if it is assumed that only actual lambs are butchered for their meat. Under the previous definition (2010 CFR §65.190), 'lamb' meant 'meat, other than mutton (or yearling mutton), produced from sheep'.