The January employment data as reported by BLS was pretty punk — only 36k new jobs created, and half a million people leaving the labor pool. Some were quick to blame the weather, others blamed BLS’ models for failing to confirm other leading indicators.
This morning, lets take a look at What Matt Trivisonno is seeing over at his Withholding-Tax data crunching site, The Daily Jobs Update. According to Matt, Withholding-Tax Collections seem to be unfazed by either the new tax cut or by the soft labor market.
Consider the following: With the substantial Social Security tax-cut in effect for 2011, we should expect withholding-tax collections to decline. However, that has not been the case. W/H tax collections have actually increased a little bit over the year-ago period:
First 21 business days of 2010: $167,171,000,000
First 21 business days of 2011: $167,367,000,000
The only way this could happen is if there were quite a lot more workers on payrolls than there were last year at this time. Note that we saw the same thing occur after the Bush tax cuts were enacted in 2003 — tax collections did not decline because the economy was already expanding.
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2001 versus 2010 Withholding Tax Reciepts
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Bush Tax Cuts and Withholding Tax Growth
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Not only does the jobs situation look like it is continuing to improve, but the public is coming back into the stock market. After a massive, “Flash Crash” induced outflow of funds from mutual funds that invest in US stocks, money has been flowing back in for three weeks now.
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Weekly Fund Flows
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Companies had until January 31st to implement the changes to withholding, so it should be fully in place by now. I don’t think it is possible to know how quickly it was phased in. I have never seen the IRS publish any stats on that sort of thing.
Since I sent the original email, two more strong data-points have come in, and 2011 collections are now $1.982 billion ahead of 2010. It’s pretty remarkable.
Tax collections day-by-day, comparing the first 23 days of last year to this year.
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Total Tax collections
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