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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Earlie who wrote (140649)12/29/2001 1:33:23 PM
From: lifeisgood  Read Replies (1) of 436258
 
One possible explanation for the huge liquidity recently added is that, given the huge loss of wages (and thus tax revenue), the consumer and economy need more juice (even if it's borrowed).

WITHHOLDING PLUNGES 9.8%, DOWN 3.4% PAST 4-WEEKS. LACK OF BONUSES HURTS. SUPER-SIZED DROP IN TAXABLE INCOME SAYS US ECONOMY WEAKER THAN EXPECTED.

Income and employment taxes withheld from all US salaried employees plunged 9.8% over the five days ended Thursday, December 20 vs. the same five days a year ago. That is the largest one-week drop that did not result from a calendar quirk or September 11 since we have been tracking.

Two reasons for the decline.
1. December historically is the biggest month for withheld income tax payments, as opposed to April for income taxes not withheld. In December most year-end bonus payments are made. This year, bonus income is way down.
2. In November there were huge numbers of layoffs that boosted withholding due to taxable severance packages. Those people are now not earning taxable income.

No one has been predicting a drop this big in current income. Conventional wisdom says that the consumer will bail out the US economy -- not with declines in income of 3.4% over a four week period. Not only does a decline in taxable income of this size presage weakness in the US economy going forward, but the budget surplus is definitely now just a memory since spending is also surging.



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