Economists have spent the better part of this winter wondering if the really lousy weather effectively torpedoed a series of economic reports — specifically, the December and January jobs reports.
With Thursday’s winter storm now reaching “bombogenesis” status, “The fear is that it will be at least another month before policymakers will be able to get ‘clean data’ with which to gauge the health of the labour market and the underlying pace of economic activity,” Deutsche Bank economist Brett Ryan writes clients.
So it’s necessary to look at other data points. From the note:
At present, the trend in tax receipts — they are currently tracking near 5% year-over-year as of the second week in February — tells us that income growth remains decent and the labour market has not downshifted as much as the last two employment reports would imply.
The chart below shows the trend in employee tax withholding receipts over the past year. We have adjusted the data to account for the tax hikes at the beginning of 2013 in order to make the growth rates in the series comparable. Since January 2013, we have found that income tax receipts have grown on average 4.5% year-over-year, close to the latest February reading (+4.8%). Over the same period, nonfarm payroll growth has averaged +187k. In short, the underlying trend in income growth does not point to any meaningful sustained downshift in the labour market.
…To be sure, the bulk of the economic data over the next month or so could display significant volatility due to the weather. Historically, any negative weather impacts in one month are sharply reversed in the following month. However, as long as high frequency data series such as tax receipts and jobless claims do not show any substantial deviation from the trend, we can be confident that economic growth has not deteriorated.
Check out the chart:
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