Jim Paulsen warns US economy faces growing BustBooming divide
Updated
Updated · Business Insider · May 4
Jim Paulsen warns US economy faces growing BustBooming divide
5 articles · Updated · Business Insider · May 4
The former Leuthold Group strategist said tech-led “new era” investment has driven about 28% of real GDP growth since 2022, while the rest of the economy has expanded at roughly 1%.
He said the S&P 500 has risen 28% over the past year, versus 20% excluding technology, and urged rapid fiscal and monetary support for weaker sectors.
Paulsen said he does not expect an official recession soon, but warned the widening split could end in a broader bust as Iran war-driven oil prices revive inflation and rate-rise fears.
Is America's economy splitting in two, and which half will determine the next recession?
With inflation high and most of the economy stalling, can the Fed save one without sacrificing the other?
As AI drives a tech boom, is it creating a 'lost generation' of workers locked out of the market?
The 2026 U.S. Economy’s "BustBooming" Divide: How AI Investment Masks Old Economy Recession and Widening Inequality
Overview
In early 2026, the U.S. economy is sharply divided between a booming technology sector, driven by massive AI investments, and a struggling old economy facing supply chain issues, rising costs, and weakening consumer spending. This divide fuels record corporate profits but stagnant wages and volatile job growth, creating the widest gap between capital and labor since World War II. Inflation remains above target, complicated by geopolitical tensions that threaten oil supplies and add uncertainty. Policymakers face a tough balance between controlling inflation and supporting traditional industries. Without targeted action to bridge this divide, risks of recession and deepening inequality grow, threatening long-term economic stability.