Inlight of this mornings stronger than expected ADP data, I thought it was a good time to see Matt Trivisonno’s  Withholding-Tax Collection data from The Daily Jobs Update. Perhaps it that might provide some early insight into Friday’s NFP.

The chart below shows that federal withholding-tax collections were strong in the Q3 – up a healthy 5.34%.



The next chart shows how the growth rate is evolving. In the beginning of Q3 (early July), it was under 4% — however, it moved higher in August and September (note the moving average (red line) rising.




Matt adds:

The quarter came in strong, and finished with good momentum. This data corroborates the recent improvement we’ve seen in unemployment claims, and the upward revisions in the job-creation numbers from the BLS.

We have seen some scary numbers recently, such as the 13.2% drop in August durable-goods orders. So there are two possibilities: The economy went through a “soft patch” that was not severe enough to cause layoffs, and is already bouncing back. Or a contraction is just getting underway and has not yet triggered layoffs.

Time will tell which scenario is correct. In the mean time, Friday’s big non-farm payrolls report shouldn’t contain any nasty surprises, and might even deliver an upside surprise.

Note: the second chart plots the Q/Q growth rate each day, for the quarter ending on that day. Because of the way the calendar works, it swings wildly, hence the moving average to smooth things out. It also uses a fixed number of days instead of calendar periods. And that’s why it stands near 4.5% while the top chart is at 5.3%. The latter calendar-period calculation is the “official” rate, though a more realistic assessment would be closer to 5.0% because the calendar-quarter benefited from some collections bleeding over from August to July.

All charts from

Category: Data Analysis, Employment, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “NFP Preview: Withholding-Tax Collections Up 5.3% in Q3”

  1. Lee Adler says:

    I use the same data. August was weak. September was strong!

  2. nofoulsontheplayground says:

    The QOQ growth rate for withholding taxes appears to lag the recessionary turns by 2-3 quarters according to that chart.

    What really would be informative is the QOQ chart combined with temporary worker withholding. That would allow you to have data that gets closer to calling the turns.

  3. jpmist says:

    Rumors of Fed Funds rate increase in 5, 4, 3, 2. . .

  4. VennData says:

    I disagree! How can this be when we know we have so much uncertainty!? I am certain we have uncertainty because of Obama and the Democrats in Congress. Don’t they KNOW that higher tax rates always ruin America, and always will?

  5. philipat says:

    As predicted last month (And critised by Mangement for implying that the participation rate was open to “Massage”) I still project about 100K and an unemployment rate of 7.9%.

    I nreality, this is a volatile series and reading too much into a single data point is ill-advised. That said, the trend remains soft at a level at or below the rate required to basorb the natural expansion of the Labour Force.

  6. But What Do I Know says:

    This data is wrong. The withholding growth for Q3 was 3.2% ($422.806 billion in 2012 as opposed to $409.612 billion in 2011) The 5.3% number applies if you use the data for 2011 for the same number of days as 2012–there was an extra day in Q3 2011. However, since the other data displayed seems to reflect the quarter comparisons regardless of the number of days in the quarter, I believe the 3.2% number is more accurate. (For example, Q1 of FY2011 (Oct.-Dec. 2010)had two more working days than Q1 FY2012 (Oct.-Dec. 2011)–if you use the same number of days calculation withholdings were up 2.4% rather than being down as is presented in the chart.)

    For the fiscal year, the increase was 2.6% ($1.770709 trillion in 2012 vs. 1.725851 trillion vs. 2011). Also, there was an extra working day in 2012 (leap year).

    You might want to rethink your conclusions about accelerating improvement.

    BTW, I love your blog although this is the first time I have commented (hate having to log in). I just thought you might like to know about the withholding data.

  7. But What Do I Know says:

    Sorry, I got that part about leap day wrong. There were actually three fewer working days in FY 2012 (Christmas was on a Saturday, so 12/24 was a holiday as was 12/31, and 9/30 was a Sunday) despite there being a leap day in 2012.