Many experts are citing surging withholding tax collections in April as an indication that the US economy is ready to take off.
The Economic Activity Composite (EAC), a trend that includes the Federal Budget Oscillator and Leading Federal Budget Oscillator - includes withholding taxes (chart 1 and 2), paints a slight more realistic and pessimistic picture. At least for now.
Headline: Withholding-Tax Collections Continue Moonshot in April
The growth-rate of withholding-tax collections advanced from 6.28% in March to 6.95% for April. This is the strongest growth-rate since the payroll-tax cuts expired in 2013, and it became possible to do apples-to-apples comparisons again. You really couldn’t ask for a stronger number.
Last month’s non-farm payrolls report was surprisingly weak at only 98,000 new jobs. But in light of the continued strength in the withholding data, that 98,000 should be revised upward.
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