All of the first quarter withholding data is out, and the quarter-over-quarter comparison is ugly any way you slice it. Growth slowed to an alarming 1.76%. It was slightly negative taking into consideration the leap-year as noted in yesterday’s post.

The dramatic plunge on the year-over-year chart on the main withholding page for today’s data point is not a typo. Because of calendar quirks, you get an exaggerated drop like that from time-to-time. The chart will probably bounce back up a little bit going forward, but the algorithm is consistent – that data point is just as real as any other on the chart.

On the main withholding page, I have posted both quarterly charts – one with the leap day and one with the full calendar quarter near the bottom of the page. Both look very bad.

We had a big rally in the stock market today in the face of this data. Gun-to-head, I would short this rally. However, it is important to keep in mind that while we have this withholding data going backward for ten years, it is still only a little longer than one full business cycle. We don’t know how well this indicator worked for recessions prior to the last one.