David Stockman reports that federal tax revenues are plummeting.
Based on the common sense proposition that the nation’s 16 million employers send payroll tax withholding monies to the IRS based on actual labor hours utilized—-and without any regard for phantom jobs embedded in such BLS fantasies as birth/death adjustments and seasonal adjustments——my colleague Lee Adler reports that inflation-adjusted collections have dropped by 7-8% from prior year in the most recent four-week rolling average.
As Lee noted in his Wall Street Examiner:
The annual rate of change in withholding taxes for collections through Thursday, February 18, approached a level which signals not just recession but is within a couple of percent of indicating a full fledged economic depression. As of February 18, 2016, the annual rate of change was -5.6% in nominal terms versus the corresponding period a year ago. That’s down from -3.7% a week before, +0.6% a month before, +5.8% three months ago, and down from a peak of +8.7% in early February 2015…….Adjusted for the nominal growth rate of employee compensation, the implied annual real rate of change is now roughly –7.5 to -8% year over year.
There's more at the link.
Federal withholding tax revenues are a direct and immediate indicator of how many people are employed in jobs well-paid enough to deduct income tax at source. If those revenues are declining, it means one or both of two things:
- Less people are employed; AND/OR -
- The jobs available are less well paid, resulting in less tax being withheld.
My money's on both factors being correct. We've spoken many times here about the unreliability of the government's unemployment figures; and we know that many of the high-paying jobs that were lost during the 2008 recession were replaced by lower-paying service positions. That's still the case.
Either way . . . that's a very bad sign.