September withholding taxes rose 4.5% in real terms versus September 2011. That suggests that a positive surprise may be coming in the release of the non-farm payrolls on Friday October 5.
This chart compares current withholding tax collections with last year on the corresponding date. This year has consistently been running ahead of last year in nominal terms, with the gap widening in September. September receipts were up 6.3% over September 2011 in nominal terms.
In real terms, the year to year gain in withholding taxes dropped from the 3-4% range in mid July to less than 2% in August. It then rebounded to a gain of nearly 4.5% in September.
The BLS jobs data is based on payrolls for the week including the 12th day of the month. During that week, the real year to year increase in withholding taxes was 5.2%. However, that number is subject to the change in average hourly and weekly earnings for the period which is released at the same time. This estimate is based on the adjustment for last month. If wage and salary increases have changed by even a small amount, that would have a significant effect on the real rate of change in withholding.
Obviously we won’t see a year to year jobs gain of 5.2%, but if the BLS numbers are anywhere near reality, which is certainly not guaranteed, then the jobs number should handily beat economists’ downbeat consensus expectations for September.
These 2 charts are updated and analysed weekly in the Professional Edition Treasury update.