Shocking Deceleration of Payroll-Tax Growth

That’s the title of an email that I sent out to my Daily Jobs Update subscribers on August 3, 2015. At the time, the Dow stood at 17,598. What happened next? KABOOM! That’s what. It’s been pretty much straight downhill since then with the Dow shedding 1,138 points by the time of this writing. Here is the payroll-tax chart that I sent (click to enlarge):


The chart is made by taking a quarter-over-quarter growth rate of federal withholding-tax collections every day, and then applying a moving-average.

Note that the vertical axis starts at 3.5% instead of zero, so the growth-rate was still positive, though way off the 6% peak in February.

Has the data continued to plunge since I made the chart three weeks ago? Good question; for the answer simply subscribe to The Daily Jobs Update.

Record Payroll-Tax Receipts in March

As you probably know, the world ended on Friday morning when we learned that only 126,000 jobs were created in March, and the Dow futures dropped 165 points. However, I’m going to go out on a limb and predict that that number will be revised higher eventually. Why would I do that? Because America’s payrolls were fatter in March than any other month in history. The Treasury Department withheld a gargantuan $218 billion dollars from the paychecks of American workers. That cannot happen unless there are a whole lot of workers. Here’s the Daily Treasury Statement (click to enlarge):


March topped the previous record set in December 2014, and was a solid 6.8% higher than the former record month of March 2014. Here’s a chart from the good folks at (that would be me) showing the record-breaking months:


Note: the y axis begins at 150 billion so the the relative size of the bars are exaggerated.

Notice that the record set in December 2007 (left-most bar) lasted for five years. Since then, new records have been set every December and March. Payrolls are very seasonal; the retail industry staffs-up in December, and in March there are 31 days, no holidays, nobody goes on vacation, teachers are at work, and many banks pay out their bonuses.

So, March is always strong, but this March crushed last March, so things are obviously still popping. Perhaps the economy is like Wile E. Coyote in that moment when he goes over the cliff but has yet to whoosh down. And maybe you are thinking that a moving average of the withholding-tax data would shed some light, and you would be right. So why not go over to and have a look-see?

Don’t expect Zero Edge to report this; that would be against their “Death to America” mandate from the Kremlin. 🙂 Besides, Rick Santelli is busy snorting coke off of “Tyler Durden’s” ass as they celebrate Friday’s futures plunge.

Note to bloggers: you may use the chart above as long as you include a link to this page.

Nailed It – Jobs Up, Market Down

On Friday morning (3/8/15) everybody was surprised when the jobs report blew away estimates. Economists were expecting 230,000 new jobs, and the BLS reported +295,000. Before the shock could wear off, people were shocked again as the raging bull market “celebrated” the good news by plunging. The DJIA closed down 279 points.

People were turned every which way but loose, except for a small elite group of investors who were advised of this exact scenario three full days prior by an email sent by your hero (that would be me in case you are confused on the subject).

How did I do it? Well, economists were frightened by rising unemployment-claims, but just because some people get laid off doesn’t mean that other people aren’t getting hired. And the soaring withholding-tax data that I follow at The Daily Jobs Update was rocketing upward. So, the stage was set for a big surprise – a surprise that would shock investors into visions of Janet Yellen taking away their punch bowl.

While I didn’t cure cancer or deliver world peace, one of the aforementioned elite investors described my call as “beautiful” and “masterful.”

The moral of the story is that you should subscribe to The Daily Jobs Update and gain access to this esoteric, and invaluable, real-time economic indicator.

New Withholding-Tax Collection Record

On Monday, March 2, 2015, the IRS set a new single-day, withholding-tax collection record by raking in $38.02 billion from the paychecks of American workers. Take a look at the Daily Treasury Statement (click to enlarge):


The previous record was set a year ago at $35.5 billion. See my report here. I know this is a record because I have daily data going back to 10/1/1998 in my database at The Daily Jobs Update where you can see charts of this data updated in real time.

So, does this mean that the jobs market is on fire? If you subscribe to DJU, look in your inbox for an email containing my thoughts on how the West Coast port strike, and minimum-wage increases may have affected this data.

Another Tax-Collection Record

A month ago, I reported on a new single-day record for withholding-tax collections, and some people thought that it was just an anomaly. Well guess what? That record has been smashed. The February 4th record was $32.241 billion, and yesterday, March 3rd, the IRS raked in $35.500 billion from the paychecks of American workers. Here is Table IV from today’s release of The Daily Treasury Statement:


A jump in collections such as this is practically impossible without a substantial expansion in payrolls. Despite weakness in recent non-farm payrolls reports, the annual growth rate of withholding-tax collections is actually accelerating.

How much is $35.5 billion? It’s 18 times bigger than Ukraine’s annual defense budget. It’s enough to buy three Ford-class super-carriers, which retail at $11.3 billion (fighter jets not included).

Gerald R. Ford super-carrier.

Gerald R. Ford super-carrier.

Record Tax Receipts – $32.2 Billion in One Day

The IRS has set a new single-day, withholding-tax record by raking in $32.24 billion on Monday, February 3, 2014. Take a look at the Daily Treasury Statement (click to enlarge):

Record Withholding

The previous record of $30.428 billion was set on January 2, 2007, and some of that was likely delayed from December due to the holiday.

What does this mean? It means that there are lots of people working, lots of paychecks being cut, and lots of income for the IRS to withhold. The stock market may be correcting, but the jobs market is going full steam ahead.

Note: I know this is a record because I have daily data going back to 10/1/1998 in my database at The Daily Jobs Update.

Are Tax Reciepts Slowing?

At the 1:25 mark of the CNBC video below, Art Cashin says:

“…if tax receipts are slowing down, which is the gossip in Washington…”

Mr. Cashin did not present any data, or even state that tax revenue are slowing. He just threw out a rumor clothed in weasel words. And keep in mind that Cashin has been comically bearish for years now.

In any case, withholding-tax revenue is not slowing at all. We can’t get a clean look at the annual growth rate because we had a payroll-tax holiday in 2011 & 2012, but if we compare to 2010, we have been running at a steady 17% rate for six months, with not even a microscopic slowdown in sight (click chart to enlarge):


Of course, if enough federal workers are furloughed for long enough, we might see the growth rate tick down. But that would not be because of a slowing economy.

Note to bloggers: you may use this chart on your blog as long as you link to my site where the chart is updated each day.

Withholding Tax Collections Plunge!!!

Here is a chart showing the 21-day moving-average of Federal withholding-tax collections, compliments of the distinguished gentlemen over at

As you can see, the average has dropped into the $5.5 billion range – the lowest level in a year!


(click chart to enlarge):

Ha, ha! Gotcha! Hope you liked my “Tyler Durden” impression! Just a little “NFP Eve” jobs humor!

If you know what’s wrong with the interpretation above, you get a gold star. Tell your mom that I said it was OK.

Of course, tax revenues always drop this time of year. The next chart is the same as above, but from one year ago:

Almost identical, right? However, the upper chart has not been adjusted for this year’s big social-security tax cut. So, it would be substantially higher if it were not for that. And that makes sense because the jobs that the economy has added over the past year are still there. Maybe we are tipping over into recession, but there is no sign of that yet in the withholding-tax data.

Do you think that it’s just a coincidence that September is the worst month for the stock market? Or could this seasonal slow-down in economic activity influence the market?

Note: It is possible to make such moving-average charts of the withholding-tax data because it is reported every day, unlike other economic data that is only reported weekly, monthly, or quarterly. The charts above, and more, are updated every day at

Nicholas Colas Bungles Withholding-Tax Analysis

On Sunday, Zero Hedge ran a piece by Nicholas Colas of BNY in which Colas stated that federal withholding-tax receipts were down 4% year-over-year for the month of February (through the 22nd). And he drew the exact wrong conclusion. February is in the books now and receipts were actually up 3.8%. See for yourself. First, look at the final total from February 2010 (click image to enlarge):

Inside the red box, you see $139,589, right? Now, let’s look at the final report for February 2011 that was released today:

Inside the red box, you see $144,891. And that is $5,302 higher than $139,589. And since the numbers are expressed in millions, that’s a $5.3 billion beat.

That is flat-out year-over-year growth of 3.8%.

Colas didn’t even get the sign of the number right! Ridiculous!

And there was a huge tax-cut too, right? The only rational, objective way to interpret this data is that the economy has been creating jobs at a very healthy clip. If you like, you can change “creating” into “re-instating jobs lost during the Great Recession”, but the idea that the economy is contracting, stalling, or even slowing down just doesn’t fly. As a matter of fact, things are likely accelerating, though we can’t tell for sure because the tax-cut has clouded this data.

So why did Colas get it so horribly wrong? He made a couple of rookie mistakes. First of all, he used a period that was too brief. Paychecks go out every other Friday, monthly, or twice-monthly. When comparing two periods of withholding data, you absolutely must use periods that contain equivalent pay-cycles.

Colas’s second rookie mistake was to synchronize to the calendar rather than the work week. February 2010 began on a Monday, while February 2011 began on a Tuesday. That will often make a big difference.

So, Colas didn’t use enough data, and the periods he compared were not equivalent. He calculated the right number, but for non-comparable data. Here is what Colas did:

Here is the correct way to handle this sensitive data:

Notice how I grouped the data into work-weeks (#5 through #8 of the year). Also notice that I made sure to have a complete pay-cycle.

That’s how it’s done.

Going by work-weeks, we come up with a gain of 1.71%. And I believe that is the correct interpretation. Calendar February was up 3.8%, but that should be taken with a grain of salt because the calendar was a bit out of sync.

In any case, the fact that the data is higher after a large tax-cut is pretty miraculous.

As to the markets, they may well continue to react to events in the Middle East rather than to our expanding economy.

Withholding Tax Ruling

Earlier in the year, a few people asked me about using social security and medicare taxes, as opposed to withholding-tax data, to evaluate national labor trends. And now I have issued an edict. In summary, it’s bad data. Social Security and Medicare revenue are calculated from tax forms using methods determined by law. The withholding data is counted-up from actual money deposited into the Treasury Department’s bank account by employers, and is therefore much more pristine.