I have never posted this particular chart before, and now seems like a good time to discuss it (click to enlarge):
This is the detailed version of the smoothed chart that can be seen here. Each dot represents the annual growth rate of federal withholding taxes as of that day.
The first thing to notice is that at the bottom of the last recession in 2002 (marked “2H02″), it took a solid six months for the data to stabilize before it began to move upward. After the economy ceases to recess, businesses still don’t hire until they are forced to do so by increased demand. And the time spent in such a purgatory can be substantial.
In 2003, the growth rate flattens out (marked “Tax Cut”) because there was a payroll tax cut passed into law. Economically, it wasn’t really needed because the economy was already expanding via an historic housing boom.
The growth rate at the peak of the cycle in 2006 crested around 8%, which was 2% below the peak of the dot-com bubble which exceeded 10% six years prior. That was a lower high. And in 2009, the growth rate plunged well below the trough of 2002. That’s a lower low.
So this chart, with its pattern of lower highs, and lower lows, paints a picture of long-term decline. I’m worried that our decline will continue until the USA reverts to a pre-NAFTA trade policy and brings the factories home.
In The Nineties, we had a massive internet-building boom, and an industrial base. In The Zips, we had a massive house-building boom, phony though it may have been. What massive project do we have now that will provide millions of new jobs? Does anybody see anything?
(Note: subscribers to The Daily Jobs Update can see the real-time version of this chart at the bottom of this page.)