More Gloomy Data from TrimTabs

From TrimTabs (subscription required), some recent data based on their proprietary real-time data collection:

We extend our discussion of wage deflation this week by pointing out the discrepancy between wages and salaries reported by the Bureau of Economic Analysis (BEA) and wages and salaries reported by the Bureau of Labor Statistics (BLS). According to the BEA, wages and salaries declined 1.1% y-o-y in May. But an analysis using BLS data on average hourly wages and average weekly hours worked shows wages and salaries fell 2.8% y-o-y in May.

Since wages and salaries are declining more rapidly than the BEA is reporting, the 6.9% savings rate in May reported by the BEA is inaccurate. When the BLS revises its estimates for wages and hours worked in the coming months, we believe the savings rate will drop considerably.

Bottom Line

Forecasts of positive economic growth by Q4 2009 are wishful thinking. Our real-time indicators show declines in wages and salaries are accelerating. Adjusting for the “Making Work Pay” tax credit, wages plunged 6.2% y-o-y in the past four weeks, worse than the 4.8% y-o-y decline in May and the 5.8% y-o-y decline in June. Also, the labor market is struggling. Online job postings fell in the past two weeks, while continuing unemployment claims hit a new record. Until the bleeding in the employment market stops, the economy will face a major headwind from collapsing incomes.

This Week’s Summary

Income – Declines in Income Tax Withholdings Accelerate in Past 3½ Months. Withholdings Plunge Adjusted 6.2% Y-o-Y in Past Four Weeks Despite Additional Withholding Day This Year. The latest week included an additional withholding day this year relative to last year. Specifically, July 4 was on Saturday this year and on Friday last year. Even with the boost from this additional withholding day, withholdings fell an adjusted 6.2% y-o-y in the past four weeks. “Other” taxes plunged 32.7% y-o-y in the past four weeks after falling 35.6% y-o-y in Q2 2009. Corporate income taxes fell 32.2% y-o-y in the past four weeks after dropping 36.7% y-o-y in Q2 2009. Incomes are dropping much faster than government statistics are measuring.

Hope they are wrong!

But hope's not a great investment strategy.

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