Two weeks ago, we looked at what is perhaps the best coincident indicator of the true, not-seasonally adjusted, picture of the US labor market, namely withholdings of income and employment taxes. We reported that while for most of 2015, tax withholdings rose at a rate of 5% or more from a year ago, on the back of job growth and gains in wages, commissions and other incentive pay, in recent months there has been a substantial dropoff in this key indicator.
As shown in the chart below, revenue inflows to the Treasury Department steadily slowed through the fall, bringing the annual growth rate down to just below 4% by the start of 2016. That’s when growth seemingly collapsed — to just 1.8% over the past five-plus weeks, from Jan. 11 through Feb. 16.
We also said that over the past 10 full weeks, starting Dec. 7, tax withholdings have grown just 3.1% from a year ago, adding that while December and January data can be influenced by the size and timing of year-end bonuses, the pronounced weakness has been sustained for long enough to rule that out as the principal cause.
Today, TrimTabs put an actual jobs number to this particular decline in tax withholdings, and estimates that the true pace of job growth in February was far below the consensus estimate of 188,000 (a number which already looked woefully inaccurate after today's latest Services ISM reported which confirmed the first contraction in service jobs in the past two years) and predicts that in February the US economy added only 55,000 to 85,000 jobs, less than half of the official estimate.
As TrimTabs CEO David Santschi notes, BLS reports "tend to be highly inaccurate, and that the jobs situation generally has been far worse than the BLS has been reporting. In fact, TrimTabs estimates job growth in February was 55,000 to 85,000 - call it 70,000 - the lowest number in two years."
If TrimTabs correct, it would mean that the payrolls chart would look as follows:
It adds the following:
... unlike the initial guess estimates from the BLS based on incomplete data adjusted for seasonality, TrimTabs bases its numbers on real-time data – the daily withholding taxes that flow daily into the US Treasury from the 141 million Americans subject to withholding taxes. TrimTabs also reported last week that withholding tax flows vs a year ago have been stalling since the fall and turned negative in February, indicating a faltering US economy.
Which, considering the collapse in not only the energy sector and its downstream industries, but also the recent bursting of the second tech bubble which has likewise already resulted in mass layoffs...
... means that tomorrow the BLS seasonal adjustment which will goalseek the payrolls "number" to be just modestly better than expected, will be a sight to behold.