A Wall Street chief strategist says the economy is not as bad as many think — and breaks down why he sees a strong recovery taking shape

• Jim Paulsen, Leuthold chief investment strategist, told CNBC on Monday that the economy is recovering better than many think.
• "We're seeing behaviors by companies and consumers that are just not consistent with the national narrative that this economy is hanging by a thread," Paulsen said.
• One of the bullish signals he mentioned was rising consumer spending in housing, auto, and durable goods.

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Jim Paulsen of The Leuthold Group told CNBC on Monday that the economy is not as weak as many believe, and highlighted multiple data points that he said indicate a strong recovery is underway.

"To me the financial markets and the corporate and individual behaviors tell a very different narrative than I hear about every day," the chief investment strategist said on Monday.

He pointed to the recent stock rally that's been led by cyclical and small-cap stocks. These stocks are sensitive to an economic recovery and their gains are a good sign, Paulsen said. He also cited rising commodity prices and increased initial-public-offering activity as bullish signals.

The chief strategist added: "We're seeing behaviors by companies and consumers that are just not consistent with the national narrative that this economy is hanging by a thread and consumers and businesses are petrified in fear."

Housing, auto, and durable goods sales have been rising, he said, adding that these are purchases that are made by consumers who feel confident and secure financially.

On the job front, he said that temporary jobs as a percentage of total jobs are rising every month, and that's a precursor to "better job creation down the road."

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Companies' capital goods orders are at the highest level since 2018, and "those are investments into the future — you only do that if you're optimistic," Paulsen said.

The strategist also said the economy may have not seen the full benefits from the first stimulus because historically fiscal policies take about a year to help the economy.

"We could have a surprisingly solid, healthy, maybe even accelerating economic growth over the coming quarters because of what we did six, nine, 12 months ago, and I don't think that gets enough attention," he said.