Payroll Friday's are always exciting for me! I know, I need a life, but I digress. When the numbers were released on August 4th, the administration cheered at the apparent success of "Bidenomics", me, well, I laughed and shook my head once again.
The headline numbers showed payroll growth of 187,000 new jobs and a
DROP in the unemployment rate to 3.5%. Remember, this is at the same time we supposedly just had nominal GDP growth of of 6.3% (real growth of 2.6%). Once again, this doesn't jive with other sources of data to verify both payroll and economic growth. Specifically, I am referring to federal tax receipts. The chart below shows two things. First, the relationship between payroll growth and tax receipts and second, it shows that we just had the largest drop in federal tax receipts in history!
Now, how is this possible? Well, about the only way this could happen is if we had a huge shift in the makeup of employment. When digging into last month's data, we did see the addition of 256,000 people classified as "multiple job holders where both jobs are part-time". At the same time, we saw a large drop in full-time job holders of 585,000 people. We know part-time jobs pay less than full time. We also know that management positions pay more than part-time positions. So, it is possible to see job growth with a drop in tax receipts under this scenario. However, the largest drop in federal tax receipts ever, while employment growth and GDP growth are still positive? I still can't reconcile the labor or GDP data and as of right now, I am just giving up at this point. Some call it "Bidenomics", I call it "BS".