Excess Returns

3% Inflation Isn't the Problem | Jim Paulsen on Why 2% Growth is the Crisis

13 snips
Dec 2, 2025
Guest
Jim Paulsen
Join veteran market strategist Jim Paulsen as he dives into the critical themes shaping our economy. He argues that the focus on inflation might be misguided, emphasizing the silent collapse of real GDP growth over the past two decades. Paulsen highlights the decline in job creation and productivity, raising concerns about a prolonged period of low economic spirits. He also discusses the shifting dynamics of demographics and policy, and why deflation could be a larger threat than inflation. Tune in for insights on how these forces may impact markets heading into 2026.
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INSIGHT

Two-Decade Collapse In Sustainable Growth

  • Real U.S. GDP growth has fallen from ~3.5% (pre-2005) to ~2% over the last 20 years.
  • Jim Paulsen argues this structural slowdown is the central economic problem, not current inflation headlines.
INSIGHT

Labor And Population Are Key Growth Drags

  • Job creation growth has roughly halved since 2005, and labor-force growth has tumbled from ~3% to ~0.5% annually.
  • Paulsen links slower labor growth to delayed family formation, lower birthrates, reduced immigration, and aging demographics.
INSIGHT

Unemployment Duration Has Doubled

  • Average unemployment duration has roughly doubled from ~13.5 weeks to over 27 weeks.
  • Paulsen says this rise destroys worker optimism and signals a loss of U.S. "animal spirits."
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