Productivity must improve if the U.S. recovery and the six-year bull market is going to continue, Wells Capital Management's Jim Paulsen said Friday.
"Most post-war bull markets have been associated with better-than-average productivity growth. This has not been one of those," Wells' chief investment strategist said on CNBC's "Squawk Box." "If we don't get that, then I'm a little concerned about the longevity of the recovery."
He noted that markets have traditionally struggled when monthly claims for unemployment insurance fall to around 300,000. Claims dropped to 282,000 in the week ending March 21, the Labor Department reported Thursday.
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The conversation has changed from "good news is always good news" to "good news is complicated" as the recovery reaches a point at which competition for labor resources picks up, the Federal Reserve prepares to raise rates and inflation pressure sets in, Paulsen said.
U.S. markets put up a fourth-straight day of losses on Thursday. The and Dow Jones Industrial average have both fallen nearly 2.5 percent over the past week.
"I think we're going to get through this, but I think the market's vulnerable with a little too positive sentiment, a little too high valuations, and a need to reset rates," Paulsen said. "Until we deal with those, I think it's going to struggle and remain volatile."