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With tomorrow the first post Election NFP, I thought we might give Jack Welch a break and instead look at the the growth rate of federal withholding-tax collections as an early indicator of payroll changes. This data series has a strong correlation with longer term trends, and a pretty good track record for monthly Employment situation reports,

On Monday, December 5, 2012, it hit its highest level of the year as measured over the trailing quarter.

Matt Trivisonno sends along the Trailing-Quarter chart (above). He notes that “it shows a daily plot of the growth in federal withholding-tax collections for the trailing quarter ended on each day. The red line is a ten-bar moving average, and as you can see, it hit 5.26% this past Monday. That is the highest rate since we were able to resume apples-to-apples comparisons in the spring (because of the 2011 payroll tax cut).

This is very impressive: America’s payrolls are bulging despite numerous businesses being destroyed by Hurricane Sandy.

The rest of the jobs data has been lackluster, and economists have low expectations for Friday’s big non-farm payrolls report. The consensus is for only 80,000 jobs to be added, compared to 171,000 in November.

So, the odds for an upside surprise look favorable. However, keep in mind that strong NFP reports in recent months have been met with “sell the news” reactions in the stock market.”

Happy Holidays,

Matt Trivisonno

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.

12 Responses to “Withholding-Tax Collections Bulge in November”

  1. [...] Tax withholdings surged in November.  (Big Picture) [...]

  2. constantnormal says:

    “… America’s payrolls are bulging despite numerous businesses being destroyed by Hurricane Sandy …”

    Hmmm … I saw things the other way ’round, with the runup from the first week in November onward representing the recovery efforts, and all the repair/rebuild efforts that much surely be ongoing.

    My guess would have been that many businesses would make alternate working arrangements, with white collar employees working from home (assuming they still had homes) and blue collar employees pitching in to help get the business running again. In such a scenario, there would be lots of overtime being put in to try and effect a return to normalcy ASAP. And then there are the out-of-town repair crews for utilities and the like.

    I see disasters like this as a case of pulling work forward from the future, with repairs and upgrades (like the Verizon replacement of damaged copper cable with fiber) taking place now that would not otherwise have been performed for years (if ever).

    Regardless of what the story is here, it’s good to see some healthy wage production. Now, if we could only get the compensation rates for the middle classes moving higher …

  3. Lee Adler says:

    That being said, I told Ms. Hays that, based on very strong withholding tax collections in November, which were up 6% year to year in nominal terms and probably around 4.5% in real terms, I expected the headline number might beat consensus. The 6% gain obviously includes some non employment related withholding, but it’s such a strong number, it’s hard to ignore.

    from Guessing Nonfarm Payrolls is a Joke

  4. 4whatitsworth says:

    You should check the December correlation. December payroll includes bonuses and in some cases estimated tax payments.

  5. Who gets paid their annual bonus in November ?

  6. VennData says:

    You Liberals love taxes. Obama and his Chicago guys are really getting desperate now.

    – Jack Welch

  7. eliz says:

    We just don’t know if this will track to more people with jobs or more already employed people with more wage income. For all we know, it is just represents higher earnings/salaries for the 1%. It could also represent a bunch of people making minimum or low wage, while CEOs and senior execs pillage their companies. Or it could represent viable growth in healthy wage employment for “the small people,” but I seriously doubt it. Am I too cynical? Or realistic? Time will tell.

  8. mcelus says:

    Likley more of a reflection of option exercises and other strategies to pull income forward going into year end with this year’s low(est?) tax rates that we’ll see in quite some time. Just reference Hussman or Grantham’s latest if you think the little surge is an indicator of some new growth pickup. The line above will look somewhat similar to the last gov’t engineed cluster&^$% also known as cahs for clunkers.

    Can we stop trying to pull everything forward in this world and just let the chips fall where they may? I really would like to know the life we’re living is not in the Matrix.

    Red pill Big Ben, red pill. Please.


    BR: These are payroll withholding taxes — not cap gains, not dividend issuance — straight up W2 withholding.

    Frighteningly uninformed comment. Keep that weak shit out of here, please.


  9. The 1% don’t receive the bulk of their compensation in wages — its more likely to be skewed towards other forms of income — dividends, capital gains, etc.

  10. DeDude says:


    I follow the rationale but the experience from Katrina was a bump in unemployment followed by a slight below trend phase after that recovered.

  11. [...] upside surprise is based on a few factors, such as strong withholding tax data, or the potential for a continuation of the decent 170k from [...]

  12. [...] Daily Jobs Update is the site which puts the data into an easily useable format for you. Here is the chart of those numbers, via Barry Ritholtz. [...]