A veteran market strategist called out a 'disturbing trend' in the US labor market no one is talking about — and you may already be feeling it at work

To some, that kind of meteoric rise signals economic strength and market efficiency following the lockdown years, perhaps in part by developments in AI. But one tenured economist says the data, in context, points to a potentially concerning shift in how capitalism is functioning.

Jim Paulsen, who has served as a chief investment strategist at firms including Wells Capital Management and The Leuthold Group, examined the recent profit boom, alongside changes in GDP and employment.

In a Substack post (3) on Monday, he called the disparity “disturbing,” yet “not widely discussed.”

“US capitalism has historically been successful because its primary component parts have always been codependent,” he wrote. “Have innovations lessened conventional US economic codependency?”

Profits are now out of sync with GDP growth and job creation

Paulsen noted that while executives have celebrated “unrelentingly strong” gains over the past five years, the labor market has been weak (4). Job growth in 2025 served as the slowest since 2020, and before that, the 2009 recession (5).

Despite a stronger-than-expected 4.3% uptick in real GDP in the third quarter of last year, growth slowed to a mere 0.5% (6) in the final quarter. Nominal GDP growth fell 0.2% to 4.2% by year’s end, the lower end of the ideal range, even with inflation (7) remaining elevated.

These indicators have historically moved in tandem with one another, but automation and other factors appear to be disrupting that relationship.

“US corporate profits rose by an amazing annualized pace in the fourth quarter of 2025… during a quarter when annualized nominal GDP growth was only 4.2%, and while annualized real GDP and non-farm employment growth were only 0.5%. Wow!” Paulsen wrote, questioning America’s “seemingly untouchable perpetual profit cycle.”

He also pointed to flat industrial production and retail spending during that period. Consumer confidence, he added, “has been steadily declining, has remained in its lowest historical quintile since 2021, and currently is at a post-war record low.”

The former strategist raised a broader concern (8): is profitable but jobless expansion sustainable, or is a reckoning coming?

The trend persists

So far this year, the stark contrast between weak hiring stats (9) and rising corporate profit margins has continued.

Earlier in April, the Institute for Macroeconomic & Policy Analysis flagged growing (10) “excess returns,” which it said can signal a lack of competition and often come at the expense of consumers, who pay higher prices when markets are so concentrated.”

Shoppers are also absorbing tariff costs (11) as businesses raise prices (12) to protect margins (13) in an inflationary environment.

At the same time, corporate profits are making up a growing share of GDP (13), while worker pay has fallen to its lowest share in at least 79 years. (14)