Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

Real Time Withholding Tax Data Accurately Forecast September Payrolls And The August Revision

Here’s what I wrote Saturday in the Professional Edition Treasury update about what the real time withholding tax data told us about the likely non-farm payrolls report.

Because of the radical slowing in withholding taxes in September, I would expect a decline in the growth rate of non farm payrolls. The currently reported consensus estimate of a gain of 183,000 is in line with the recent rate of increase, and is therefore probably much too high. On that basis I’d expect a “miss” when this number is reported on Tuesday. Treasury bond traders would likely view that as bullish for Treasuries. But what about stock traders? Chances are that they’ll see it as a reason for the Fed to at least continue or even increase QE, so they may buy the news as well. This is speculation on my part, but that’s my guess for what it’s worth.

The headline seasonally adjusted nonfarm payrolls number came in at 148,000 in the BLS release this morning.

The withholding tax data for August also accurately foretold that the August number would be revised up in the September release. Earlier it told us that the July payrolls release was too high. Here’s a snip from the Treasury market update a few weeks ago.

The jobs figures released for August are far weaker than the withholding tax collections indicated. The BLS
data is therefore likely to prove misleading once again. The August number should be revised up sharply in
the September release. The fact that the market trades based on the initial release, and the Fed makes
decisions based in part upon it, is completely insane. If the Fed does not taper QE because of the slightly
weaker than expected jobs number, which is almost certainly too low, then it will continue to fuel the raging
asset bubbles in stocks and housing, creating an even more dangerous situation as time goes on.

This morning, the BLS revised the August headline number from 169,000 to 193,000. If that more accurate figure had been available last month, would the Fed have elected to taper QE? This illustrates once again the absurdity not only of the market’s kneejerk reactions to initial data releases, but of the Fed basing its policy decisions on those data releases.

This chart and a complete analysis of the Treasury’s real time cash flows is updated weekly in real time in the Wall Street Examiner Professional Edition Treasury update.

Federal Withholding Taxes Adjusted For Inflation - Click to enlarge


This weekly report includes 36 pages of charts, tables, and clear, concise, cutting edge analysis and commentary on the following topics:

Treasury Auctions
Week Just Completed
Week Ahead
Treasury Auction Takedowns By Investor Class
Primary Dealer Trading
Foreign Central Banks
ECB And The Treasury Market
Bond Fund Flows
Bank Purchases Of  Treasuries
Federal Government Cash Flows
10 Year Treasury Yield
US($) Dolor Index

This information gives an overview of the key factors affecting market liquidity, supply and demand, not just for the bond market, but especially for the stock market. A companion report follows a few days later covering the following additional topics with their own charts and tables telling a clear story on the domestic and international cash flows that drive markets:

Macroliquidity Component Indicators
Fed, ECB, and BoJ Balance Sheets, Vs. US Stocks and Bonds
Fed Cash to Primary Dealers
US commercial bank deposit flows
Bank Trading Accounts
Bank reserve deposits
Key Long Term Commodities Charts with Commitments of Traders
Treasury Auctions, Federal Revenues and Supply Impact, and Treasury Yields
Open Market Operations (OMO) and Monetary Policy Actions
Other Policy Tools and Total Fed Credit
Other Fed Balance Sheet Items – Liabilities
Bank Loans Outstanding
Commercial Paper
Fannie and Freddie
Money Supply and Fund Flows
Bank Capital Trend

The Wall Street Examiner Professional Edition’s unique perspective on the macro liquidity forces that drive markets gives you a trading edge that you’ll find nowhere else, even institutional services costing tens of thousands of dollars yearly. Follow it risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. 30 day risk free trial for new subscribers. Click here for more information.

See Rick Santelli use one of my proprietary charts on CNBC to explain how the Fed impacts the stock market directly through its trades with the Primary Dealers. This is just one example of the dozens of proprietary charts that I build that will help you to clearly see and understand the market’s trend, and when that trend is beginning to change.


Economic Chart Gallery

Follow my comments on the markets and economy in real time @Lee_Adler on Twitter!

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.