Episode summary
1% Growth. Zero Jobs | Jim Paulsen on the Recession Hiding in Plain Sight
Excess Returns
· · Hosts: Jim Paulsen, Jack Forehand, Justin Carbonneau
Summary
Jim Paulsen argued that the economy looks much weaker than the headline numbers imply, with 1% growth and zero job creation masking a broad slowdown in the “old economy.” He said a relatively small “new era” segment, led by technology and AI-related investment, is doing most of the work in GDP and profits, while the remaining 89% of real spending is essentially flat.
He also said the Iran conflict has already been heavily “vetted” by markets through higher oil prices, a stronger dollar, weaker sentiment, and higher volatility, so he expects some of the initial shock to fade. Even so, he warned that the episode could still be a contractionary tax on the global economy, especially if it drags on or creates more extreme scenarios.
On markets, Paulsen said he remains constructive on international and emerging markets, especially on pullbacks. He argued that leadership is already shifting away from technology toward broader market areas such as small caps, value, cyclicals, and international stocks, and he tied that shift to easing policy and a steepening yield curve. On AI, he took a balanced but ultimately constructive view: it may destroy some jobs in the short run, but it should also lower costs, create new demand, and ultimately expand economic activity.
Key takeaways
- Paulsen said 1% growth with zero job creation is recession-like and reflects weakness in 89% of the economy, not just the headline GDP number.
- He expects the Iran shock to matter less over time because markets have already adjusted through higher volatility, oil, and rates.
- Paulsen remains positive on international and emerging markets and would use weakness to add exposure over 30 to 60 days.
- He sees leadership rotating from technology toward broader market groups as policy turns less restrictive and the yield curve steepens.
- Paulsen views AI as disruptive but ultimately disinflationary and likely to expand demand as lower costs free up spending elsewhere.
Notable quotes
“Today we have 1% growth with zero job creation. Every other time that we had this situation, you look at 1% growth, we were well into a recession”
“The small 11% new era piece is now wagging the whole GDP dog”
“Why are we worried about inflation when 90% of the economy is dying and the other 11% of the economy is a huge deflationary force”
“I think we're further along in this than we know”
“I would rather be a net buyer of that weakness right now”
How the episode opens
Today we have 1% growth with zero job creation. Every other time that we had this situation, you look at 1% growth, we were well into a recession, either in one or headed to one. And yet today, we seem okay with this.
In the last year, real new era era spending is up 14 times faster than the rest of the economy. There's 14% growth in real new era spending and there's 1% growth in the remaining 89% of real spending. The small 11% new era piece is now wagging the whole GDP dog.
And more importantly than that, it's covering up the fact that the 89% of the older economy, most of our economy is basically flatlined. Why are we worried about inflation when 90% of the economy is dying and the other 11% of the economy is a huge deflationary force.
Jim, nice to see you again. Welcome back. — Oh, thanks for having me, guys. Good to see you, too. — By the way, that was a great Baron's piece at the end of February. Um, I was really happy I was really happy for you to see that. That was really great. Yeah, it's always a great opportunity to be in that iconic uh publication. So, I I appreciate the opportunity myself, too. Uh it's been a while since I've had one of those. So, that's good. Yeah.
Now, I did learn something new from reading that piece that I didn't know which I should have picked up on the Substack, which is you call yourself the retired grandpa. — What? — Nice. They got that in there. Yeah, I that's how I feel anyway. So, I I'm just doing what I like to do now. And uh you know I mentioned to you guys before I came on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- geopolitical volatility
- oil prices and the us dollar
- ai and job disruption
- equity leadership shift
- fed policy and easing expectations
Watch the episode
Watch “1% Growth. Zero Jobs | Jim Paulsen on the Recession Hiding in Plain Sight” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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