Since the beginning of June, withholding tax collections have rebounded a bit, and stabilized at a level that is certainly better than the negative readings of the past 3 months. However, the nominal year to year gain of x% as of July 3 is still below the inflation rate of employee earnings of x% in recent months, so it continues to signal a weak economy. But it is stronger than it was in the March-May period, in other words, sequential growth, month to month. Non-subscribers, click here for access.
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The BLS nonfarm payrolls survey of employers is dated as of the 12th of the month. While it is supposed to represent conditions in June, the fact is that as of June 12, HR managers report conditions mostly based on end of May payrolls. At the end of May, half-month payrolls were down x% year to year, not adjusted for inflation. Non-subscribers, click here for access.
That compares with a x% year to year decline at the end of April. It suggests that as of the June 12 survey date, there was significant jobs xxxxx. The June nonfarm payrolls report would be strongly xxxx if it were accurate. Non-subscribers, click here for access.
Unfortunately, as we have noted month in and month out, the BLS survey methodology and adjustment process results in so much distortion and noise in the first release that there’s virtually no correlation between what the BLS reports and employment tax receipts. Non-subscribers, click here for access.
As a result, the BLS has been overstating jobs gains for months. Maybe this will be the month where the rubber band snaps back to the real trend. Eventually the BLS will get there through its monthly revisions and annual benchmarking when the biggest adjustments occur. That’s when the BLS fits its survey data to tax data. Non-subscribers, click here for access.
Consequently, interpreting the first monthly release and attempting to relate to stock prices and guesses about Fed policy is a fool’s errand. Obviously everybody on Wall Street wants to participate. Non-subscribers, click here for access.
The jobs release only matters for a millisecond as the market reacts to it. Then the market returns to trend. The real significance of the withholding data is not what it tells us about the jobs report. It is what it reveals about current revenues and the trend of revenues. It is the variability of revenues that tells us what to expect about Treasury supply in the near term. Non-subscribers, click here for access.
And Treasury supply is what matters. Here’s what to expect, based on the current real time tax collections data. Non-subscribers, click here for access.
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