- by New Deal democrat
While we are waiting for new data releases to start back up, let me follow up on the surprise revisioins last week to personal income, that took real personal income for declining for over a year to an almost relentless rise. So shocking was this reversal that for the first time I wondered if the T—-p Administration had been successful interfering with economic reporting. To give you an idea of just how large the revisions were. here is the YoY% change as originally reported (orange) vs. as revised (blue) of nominal personal income:
Once adjusted for inflation, the entire trend in *real* personal income changed from negative to positive:
Ultimately an answer came back from someone with impeccable credentials who pointed out that, so long as the revisions were in accord with the source data series giving rise to the revisions, they should be accepted.
So what do those data sources say? Let’s start with the Census Bureau’s note expalining where the revisions came from:
While I haven’t been able to track down all of these sources, there are two - the QCEW and income tax withholding receipts - which are readily available.
The QCEW is what the late financial analyst Jeff Miller called “the gold standard” of employment data, as it is the actual reporting by roughly 97% of all employers. Its biggest drawback is that it is not reported until almost 6 months after the close of any given Quarter, and it is subject to revisions until March of the ensuing year. I’ve reported on the employment side of this release for many years, but haven’t paid particular attention to the income side.
In any event, as per usual the data lags by half a year. Additionally it is not seassonally adjusted, so the only valid measure is YoY. To cut to the chase, here is the post-pandemic YoY quarterly record of aggregate wages:
While I can’t show you a graph, I also went back and calculated the full quarterly change in withholding income taxes paid YoY from the Treasury’s “Daily Treasury Statement.” There are very volatile and noisy on a daily, weekly, and even to some extent monthly basis, but by the time you take the entire 13 weeks that constitute a Quarter, the vast majority of the noise has been ironed out.
With that explanation done, below is a list showing the revised YoY% change in nominal personal income beginning with the 4th Quarter of last year, and ending with the first two months of Q3 of this year from the personal income releases vs. the entire third quarter for withholding tax payments. Note that since the QCEW has only been reported through Q1 of this year, there are no subsequent comparisons for that metric:
Quarter // P. I. (O) // P. I. (R) // QCEW // D.T.S.
Q4 ‘25 // +4.4% // +4.8% // +4.2% // +4.6%
Q1 ‘26 // +3.6% // +4.6% // +3.9% // +5.0%
Q2 ‘26 // +3.5% // +4.4% // n/a // +1.9%
Q3 ‘26 // +3.8%* // +4.4%* // n/a // +5.6%
(O) = original; (R) = revised
*average of first two months of quarter
For the entire period through August, the originally personal income averaged +3.82%. As revised it averaged +4.55%. For the entire fiscal year ending in September, YoY withholding tax payments averaged 4.3%, much closer to the revised income data than the original. for the first two quarters of the fiscal year, however, the QCEW is much closer to the original income data than the revisions (although note that the QCEW explicitly only covers wages, whereas the D.T.S. includes estimated tax payments which of course cover all sources of income, not just wages).
The QCEW of the 2nd quarter of this year should be reported next month. At that point we will have a better idea of how well that data tracks the revisions to personal income.
In any event, given the major revisions to the personal income data, going forward I will not just pay attention to the employment data in the QCEW, but also the wage data; and I will also report on the 13 week/quarterly average of withholding payments.
< sigh > more work. For some reason I keep thinking of this old “Far Side” cartoon:
