Last week I took a pre end of month look at the withholding taxes for November because of the earlier than usual release of the jobs report. We saw a weakening trend, along with an indication that the BLS jobs data impressionist art might beat expectations.
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As I wrote in last week’s report:
11/29/22 The annual growth rate is trending down, indicating falling revenues. Whether that’s due to falling employee earnings inflation or a slowing economy, or combination of the two doesn’t matter. Only the fact that revenues are declining matters. That implies more supply ahead. Non-subscribers, click here for access.
Another item of note is that the usual 3 month respiration cycle exhalation phase in the US economy expired early. The last two cycles have been sucking in for far longer than they’ve been blowing out. This is another sign of weakening. Non-subscribers, click here for access.
As for the implications for the current jobs report, you never know because the BLS methodology in s so speculative, being based on unsupportable assumptions about seasonal adjustment and the birth and death of businesses. They then fit their previous monthly numbers to actual data for months and years after the fact. Non-subscribers, click here for access.
The first release is impressionistic art. Bad, impressionistic art. It only becomes more realistic after they refit their numbers to real numbers derived from unemployment compensation and tax data. Tax data that we have in real time. Non-subscribers, click here for access.
That said, the withholding tax collections for November are about where they were in October. That implies that there was no change in the level of jobs, or maybe some decline, given that there is some wage inflation. That’s the reality. The nonfarm payrolls number is something else. Non-subscribers, click here for access.
Dow Jones Marketwatch economists’ survey consensus is for a gain of 200,000 jobs vs. 261,000 reported in October. Based on October withholding, the October number was understated. The BLS often makes up for that in the next month’s number. Bottom line is that the BLS number should meet or beat expectations based on their October number being too low, and the November tax collection level being about the same as at this point in October. Non-subscribers, click here for access.
But I reiterate that this is a sideshow. Whatever the BLS reports, and whatever the initial market reaction, the fact is that the market will go on about following the trend that it has already established. Where we need to be focused, is on the fact that the market will continue to get pounded by new supply. That will limit the size and duration of the current rally phases in stocks and bonds. Non-subscribers, click here for access.
Our review of the month end data from the US Treasury confirms that revenue growth continues to slow. Here’s what that means for investors. GTFO. Non-subscribers, click here for access.
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