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.
2001 versus 2010 Withholding Tax Reciepts
Bush Tax Cuts and Withholding Tax Growth
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.
Weekly Fund Flows
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.