Excerpt:
Evidence has mounted that the monthly jobs reports are way off the mark and that the labor market is much weaker than it appears. That suggests a recession may be closer at hand for the U.S. economy than widely believed... While the headline "Why You Can't Trust Friday's Jobs Report" requires a high level of conviction, we have the receipts to back it up: tax receipts.I hope the chart comes through okay, because IBD is behind a paywall.Withheld Taxes
Exhibit A is the data on federal income and employment tax withholdings reported in daily Treasury statements. An IBD analysis of Treasury inflows finds that the growth rate of the taxes withheld from worker paychecks has been sliding sharply. Growth in those tax receipts over the 10 weeks through Aug. 26 faded to just 6.7% from a year ago. That's down from about 12% through mid-May.
The big slowdown in the growth of withheld federal taxes presents a stark contrast to the aggregate weekly payrolls data in the monthly employment reports. Bureau of Labor Statistics data shows that economywide pay rose 9.7% from a year ago in July — nearly 45% faster than the recent pace of growth for tax receipts...
[I]f tax receipts are slowing so markedly, that's bad news for the economy. The tax data suggests that aggregate labor income is now shrinking in real terms. With wages growing at least 5% and employer payrolls up 3.6 million, or 2.5%, in the six months through February, the tax data hint that hiring has basically ground to a halt in recent months.
IBD basically says the discrepancy is due to the Labor Department using the Household Survey (based on workers) to assess unemployment data versus the BLS using the Employer Survey (based on jobs), which is less accurate and often revised one year later.
So, what should we believe, the government jobs report or the government paycheck withholding tax receipts?
-PJ