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.
Just found your site and it is revealing to say the least. I just wondered if inflation adjustment is part of your calculations. 1.7% growth looks considerably worse allowing for official inflation, much much worse compared to M3 growth in the 15 – 20% range.
Thanks for some great insight.
Hi Gary,
The numbers I use are not adjusted for inflation. I might add charts in the future using real dollars instead of nominal dollars. I will make a note on the page since I’m sure that other people are wondering the same thing.
Thanks for the kind words,
Matt
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