SS on NFP & More


Social Security (SS) is out with preliminary numbers for January’s payroll tax revenue:


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This is, of course, a preliminary number, and there will be revisions. The January data is based on a set of assumptions that SS uses to run its computers. Actual data will take at least three months. I find it interesting that SS is assuming that the US economy starts off the year in low gear.


-The January 2013 YoY increase in payroll tax revenue is projected to be $1.1B (+2.2%).


-The January 2012 Yoy increase in payroll tax revenue was $3.2B (+6.5%).



I looked at the YoY % changes in SS tax revenues. Its pretty clear that the big improvements in Q1 – 2012 will not be repeated in 2013:




Possibly the computers at SS are taking into consideration a “post cliff” slowdown. The CBO has projected a decline in GDP in the early part of the year, so it is possible that SS is modeling based on that assumption. (The 2% increase in payroll taxes sucks out $10B a month in spending power.)


The payroll numbers for Q1 2012 were very solid: January + 275K, February 259K , March +143K, Total = 677k. The early read from SS is that we will be lucky to see one-third of that in 2013.


I do look at the SS numbers in the context of the monthly Non-Farms data. This is a murky analysis as the BLS fudges its numbers with various adjustments. Looking backward over a longer period of time, there is a correlation between SS and NFP, but in any given month, it's random.


To the extent that the SS numbers do tell a story, they are suggesting that the December NFP will be a tad on the soft side. Under 150k; my best guess is 125K. The wild card is Sandy. ADP thinks the storm added 40k construction jobs. (Zero Hedge discussion). That could bring the actual total for the month closer to 165k. We shall see.


The December NFP is looking like a non-event. The real question is what is going on in January. It’s freezing in “Sandy Land”; it will be for weeks. I doubt that much construction is getting done. Between the cold, and the cliff drag, it looks like a slow start to the year.




SS has also come out with the January 2013 Benefits Paid number. A lumpy $66.666B went out the door.




The benefit “nut” for January is $3.3B, (5.1%) higher than a year ago. The YoY payroll tax revenue was up only $1.1B (2.2%). Got that? Revenues up 2%, expenses up 5%. Boom!


The January numbers can be used by wonks like me to estimate annual results. The bottom line at SS in 2013 will be a cash deficit of $75B. The 2012 deficit was $52B.


Keep in mind that the deficits at SS must be funded by issuing more Debt to the Public. The debt needed for SS is ON TOP OF the debt needed to fund the government’s other operating deficits.


The USA now has two big drivers of debt. Most folks understand that the deficit adds to the debt. The country will soon learn that SS is becoming a very big driver of incremental debt. The upcoming debate on entitlement reform will force the issue of SS = Debt to come on the table. I can hear the howling already….