TrimTabs: Its a Recession, and Its Already Over (Wrong)

This one is no April Fools joke: According to TrimTabs, the economy has been in a recession for six months now. And, it has already emerged from the recession (or is about to).

The basis for this somewhat startling set of conclusions? Withholding Income Tax receipts, online job listings, and several other factors.

I highly doubt both the methodology and conclusion TrimTabs has reached. It has to do with the way Trimtabs looks at the annual withholding data. "According to Madeline Schnapp, director of macroeconomic
research at TrimTabs, withholdings during March were 4.1% higher than
one year ago."

That is, to be blunt, an absurd basis for making such a conclusion.


Well, it fails to consider prior rates of change. As we noted last week, the year-over-year Changes in US Withholding Taxes have been trending considerably lower. Merely taking a single data point — such as 4.1% — without providing any context is just plain foolish. What is the significance of that number? Is it  good, bad or indifferent? How does the data compare to the prior March’s year-over-year gain?

The answer is not encouraging: Its up a whole lot less than March 2007.

Here’s the latest chart of Withholding Taxes, via Matt Trivisonno:

I GOT YOUR 4.1% RIGHT HERE:Wh_tax_4108

Source: Wheee! The recession is over!


To think, Goldman Sachs recently bought a minority stake in TrimTabs (I guess they are no longer the smartest house on the street).


There are two other factors to consider regarding the TrimTabs model (tho I think that first one above is fatal):

First, the 2003-2007 post-recession recovery was the historically weakest in terms of job creation since WW2. Thus, we should not expect the raw numbers of layoffs to parallel prior cycles. Job listings, which have a much shorter data history, should be similarly anomalous.

Second, Gross Domestic Income (GDI) has done a substantially better job recognizing the start of the last several recessions than other factors, such as GDP. And, GDI recently suffered its biggest drop since 2001.
Based on that, the recession likely began in December — not October.


Changes in US Withholding Taxes
Monday, March 24, 2008 | 07:12 AM

Good and bad economic news   
Mark Hulbert
MarketWatch, 11:29 p.m. EDT April 1, 2008

Did Economy Really Escape Fourth Quarter Drop? 
Brian Blackstone
WSJ Real Time Economics, March 27, 2008, 2:02 pm

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What's been said:

Discussions found on the web:
  1. Marcus Aurelius commented on Apr 2

    The end of the recession will be spun fast and furiously today. The PPT and the Kool-aid drinkers want the meme to replace the reality once again. The only question is whether reality will play nice and capitulate. If additional problems in the financials raise their ugly heads, the meme disappears in a puff of smoke.

    I’m betting on reality.

  2. tbapple commented on Apr 2

    Toothless regulation (unless your small), good taxpayer money after bad (similar to Iraq), and the bulls buy it hook line and sinker (for now). It seems that bears will be in a bad position until after November or a Black Swan event that will allow the bulls to have a scapegoat.

    Either that or Soviet style communism really does work better then the free markets.

  3. Jack Stevison commented on Apr 2

    Biderman gets asshat of the year award. anyone remember this from last summer:

    ” “Fear and ignorance seem to be gripping retail investors these days,” said Charles Biderman, chief executive of Santa Rosa, Calif.-based TrimTabs on Thursday, pointing to ongoing concerns about subprime lending and slumping housing markets.

    “There’s no credit risk; no bank is going to lose money on this subprime fear,” he added. “Income-tax collections are strong, and you don’t have a housing collapse when wage income and job growth are surging.”

  4. VennData commented on Apr 2

    Could that spike in income be the handful of hedgies who shorted what Biderman said last year? … and now have to recognize their billions of gains as carried interest? …on their W2… er… a… W2-CI?

    And don’t lose your faith in GS, Biderman may be the best reverse indicator around.

  5. Ross commented on Apr 2

    I’ve followed Biderman for some years now and the guy has developed some useful stastics. However, as somewhat of a pollyanna, he only recognizes reality after the fact when whomped up side the head with a 2 X 4.

  6. Nihilism commented on Apr 2

    Must be April Fool’s day Hangover for Hulbert & TrimTabs

    Dow 16,000 — Yes, we can!! My guess is Benny & Bush/Paulson will do anything to save wall-street /free markets before they hit a dead-end.

  7. Chicago Finance commented on Apr 2

    Regarding the TrimTabs Online Job Postings Index, “if the economy were collapsing, this indicator would be dropping like a rock, just like it did in 2000 and 2001.”

    However, back in 2000 and 2001 IT jobs provided a disproportionate share of online job listings and that was the employment area collapsing.

  8. Donaldo commented on Apr 2

    I read the TrimTabs news last night and I had the same thought. Just because the withholdings were up year over year doesn’t mean that that jobs increased. Heck, withholdings could be up y-o-y and jobs could still decline and vice-versa. It’s amazing some people who are in the forecasting business don’t understand something as simple as that!

  9. Cherry commented on Apr 2

    Going by NBER standards, they probably have a prelim recession starting date of Feb 27.

    Notice that is MUCH later than those idiots or Barry.

    People that don’t understand the nature of recession, where they begin and what to look for AS they begin are doomed to failure and inability to see straight. Every recession starts a little different but can be managed to be seen using NBER methods.

    Basically, you can out NBER, NBER. I correctly called the beginnings of the 1990 and 2001 NBER recessions FWIW, on the dot.

  10. Paul in NYC commented on Apr 2

    From the architectural world we don’t see anything dramatic yet. But we have had condo projects in Boston and Charlotte stopped in their tracks.

  11. Michael Donnelly commented on Apr 2

    Even a chimp could tell the direction that chart is taking

  12. Eddie commented on Apr 2

    First of all, it’s not clear to me why a yoy growth rate of ‘only’ 5.5% (trend since the start of the year) signals a recession for you guys in the first place.

  13. Advsy commented on Apr 2

    This is the latest in the Truthiness wars and the general silliness going on in the minds of too many people!

    Now that every blue collar worker in the entire country has figured out that things are bad the spin has moved to. “yes, we are in a recession but it is more than half over!!

    That leaves them free to rejoice and issue statements about the bottoms are in and other nonsense.

    Talk about the ultimate way to look good. Before one even has to admit to things being bad, you just say it was bad but it is over!

  14. Darkness commented on Apr 2

    Huh!? to TrimTabs. Let me guess, they assigned this little model to the intern who only comes in on weekends between tennis matches.

    If that chart indicates recession, it indicates we are doomed for many more months, if not years.

    One would hope they’d be too embarrassed to even make an April fools joke out of that. This isn’t “fishing for any good news” this is just cluelessness. Yikes and yowsa.

  15. Fred commented on Apr 2

    Withholdings has the advantage of being a hard number. In hard numbers we trust.

  16. Pat G. commented on Apr 2

    I Agree! Except for central bankers flooding the global markets with more liquidity what has fundamentaley changed?

    I Agree Again! Nothing.

  17. The Big Picture commented on Apr 3

    More on Federal Withholding Taxes

    Yesterday, I referenced Matt Trivisonno’s chart on federal withholding chart in order to defenestrate some wildly inaccurate research from TrimTabs. I don’t know what the specific methodology employed by TrimTabs actually is, but simply calling 4.1% ta…

  18. Deep commented on Apr 18

    Funny, all these Finance companies say the same thing. Yes, the recession is over, for the Wall street since the Fed will bail them out.
    That is what he really meant.

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