As the total dollar amount of Federal withholding taxes continues to increase, we should expect to see retail sales and sentiment continue their improvements. This has resonance for GDP as well as the Presidential Election.
From Matt Trivisonno:
As you can see on the above chart, the snapback in withholding taxes that began in May continued higher in August. The growth-rate currently stands at 6.37%, which is the strongest rate in over three years for this particular chart.
The rightmost data-point on the chart compares June, July and August of this year to June, July and August of 2015. So, of course, that’s a very easy comparison considering the job losses in the oil & gas industry last year.
Therefore, we needed to temper our enthusiasm a little bit. Nevertheless, economists seem unusually dour to expect only 175,000 new jobs in Friday’s Employment Situation report. In the last two reports, we had +287k and +255k. Normally, economists would extrapolate, but for some reason they are being reluctant.
Another strong report might convince Janet Yellen that the economy can withstand another rate hike. So, while the withholding-tax data is good news for the economy, it may or may not be good news for the stock market.