Bonus Shifting Makes Estimating Employment Growth More Difficult Than Usual
Sausalito, CA — January 2, 2013 — TrimTabs Investment Research estimates that the U.S. economy added 145,000-165,000 jobs in December, down from 202,000 jobs in November.
TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than the initial estimates from the Bureau of Labor Statistics.
“We’re citing a range rather than a single figure for December because the impact of year-end bonuses on withholdings made it far more difficult than usual to make our employment estimate,” said David Santschi, Executive Vice President of TrimTabs.
In a research note to its clients, TrimTabs explained that many employers probably shifted bonuses that normally would be paid in January and February into December due to income tax hikes that took effect on January 1. This bonus shifting skews the year-over-year comparisons TrimTabs uses to estimate employment growth.
TrimTabs reported that wage and salary growth accelerated to 8.2% year-over-year in December from 5.5% year-over-year in November. Adjusting for the government’s data on consumer price inflation, real wages and salaries rose 6.4% year-over-year in December, up from 3.7% year-over-year in November.
“Most if not all of the acceleration in wage and salary growth last month was probably due to bonus shifting, and growth is likely to slow sharply this month,” said Santschi. “None of the other key economic indicators we track point to a dramatic pickup in economic activity.”
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TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity—including mutual fund flows and exchange-traded fund flows—as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit www.TrimTabs.com.
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