An indicator shows wages could grow 4% this year: Jim Paulsen

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An employee works on the assembly line installing parts on the Duratech 35 V6 engine at the Ford Motor Co. Engine Plant in Lima, Ohio.

“In the current recovery, though, the unprecedented sluggish pace of nominal GDP growth has allowed the unemployment rate to fall much lower than ever before without aggravating cost-push pressures.”

In turn, that has kept the pace of average hourly earnings muted — around 2.5 percent or lower for most of the recovery period. Nominal GDP generally only trails unemployment during recessions.

But now with the inflation-adjusted GDP level at 4.4 percent and the unemployment rate at 4.1 percent, a breakout could be on tap. Paulsen surmised that a “spurt near 4 percent” is possible.

“For the first time in this recovery,” the GDP-unemployment relationship “has turned positive and history suggests wage pressures are finally likely to intensify more than most anticipate this year,” Paulsen said. “The unemployment rate is low, and equally important, nominal GDP growth is finally strengthening. This combination may soon revive inflationary worries.”

Indeed, bond yields have been on the move since September, with the benchmark 10-year Treasury note now around 2.70 percent, its highest since April 2014. Similarly, the 5-year breakeven rate, or the difference between the nominal bond and its inflation-pegged counterpart, was trading Monday around 1.91 percent, its highest since March 2017.

Paulsen references “worries” because he thinks that the rise in wages could boost inflation expectations, driving up bond yields and “perhaps bringing a correction to the stock market.” If the market doesn’t fear the inflation threat, he said the “recent melt-up in the stock market will continue.”

WATCH: Paulsen talks inflation and rising bond yields.