Most of the US economy is in a recession
Source: Hacker News
By Naomi Buchanan
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Sean Gallup / Getty Images
Published: 2026‑03‑05 19:01 UTC
- Most of the US economy is in a recession, Jim Paulsen said in a recent post.
- The veteran strategist explained that “new era” spending is propping up the wider economy.
- Paulsen compared the bifurcation to the “Mag 7” vs. the rest of the stock market.
The US economy has proven more resilient than many feared, but one Wall Street veteran says that a recession is only being held back by tech.
Jim Paulsen, a markets strategist with more than 40 years of experience on Wall Street, argues that most of the economy is already in a recession. Tech spending has an outsized influence on economic growth, bolstering the data while the “old” economy struggles.
“Technology may be the tail wagging the dog, but the rest is a recession by any other name,” Paulsen wrote in a Thursday Substack post.
Real private GDP rose 2.3 % in 2025, Paulsen said, but nearly all of this growth is tied to what he calls “new era” growth.
“Excluding new‑era investment, the other 89 % of real private spending rose by only 1 % with no job creation,” the strategist wrote.
Real GDP is generally considered a good measure of economic growth, but in recent years the metric has been distorted by factors such as government spending, tax changes, and tariff‑fueled supply‑and‑demand volatility. Focusing on private real GDP strips out some of these distortions.
“Do we really need to continue focusing mostly on inflation when 89 % of the private economy is in a recession and the 11 % which is booming — new‑era pursuits — are by their very nature ‘disinflationary’?”
The “New Era” Economy Is Booming, Lifting GDP
The strategist focused on business spending on information‑processing equipment and intellectual property, using it as a measure of “new‑era” spending. This includes big‑tech’s mega‑spending on AI (see Business Insider article).
Paulsen found that the new‑era subsector has grown nearly 2.5 × faster than traditional private‑sector spending, and the gap has widened in recent years.
New‑Era Investment Spending as a Share of Real Private GDP (1965‑2025)
Figure: New‑era investment spending has had a growing influence on real private GDP, according to Jim Paulsen’s calculations.
“Overall, new‑era pursuits have grown rapidly and their influence on the overall U.S. economy has become outsized relative to old‑era activities.” – Jim Paulsen, PaulsenPerspectives (Substack)
- 2025 growth: New‑era private spending rose 14 %, versus 1 % growth in private spending that excludes the tech‑focused subset.
Source: Jim Paulsen’s Substack, PaulsenPerspectives.
New Era and Old‑Economy Gap Mirrors “Magnificent Seven” vs. the Other 493
Paulsen compared the widening gap to the stock‑market narrative of the Magnificent Seven versus the remaining 493 stocks in the S&P 500.
The market has recently seen gains broaden, with AI‑disruption fears and the war in Iran supporting a broader rotation out of former tech leaders:
The dynamic between the new‑era economy and everything else shows a deeper bifurcation.
“When the President (source), the Federal Reserve Chairman (source), economists, financial pundits, and journalists imply that overall real‑GDP growth remains okay, they miss the fact that, similar to the stock market, the aggregate growth number may look satisfactory while the great bulk of the economy—89 %—is not doing okay.”
This dynamic could explain:
- The mixed sentiment among economists (source)
- The discrepancy between the American public’s negative view of the economy (source) and what the economic data actually signal.
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