US Federal Tax Revenues

I remain optimistic about the US labor market. Over the past two days, I explained why I am not changing my view despite the government’s disappointing report for March. The weight of the evidence suggests that the pace of employment gains remains strong. However, I have to provide a balanced analysis, and the latest data on individual tax receipts is tipping the balance in the wrong direction.

The 12-month average of individual income tax receipts reported yesterday by the US Treasury has flattened out around $1.1 trillion over the past 11 months, after rebounding from a cyclical low of $846.8 billion during January 2010. On the other hand, overall federal tax revenue tends to be highly correlated with the Index of Lagging Economic Indicators, which continues to rebound. I expect that the recent improvement in the labor markets will soon show up in better individual tax receipts.

Today’s Morning Briefing: In Government We Trust. (1) The Governor’s speech. (2) Politicians want to be loved. (3) Couch potatoes with benefits. (4) The Founders floundered on balancing the budget. (5) The Fed’s fiscal policy. (6) Starve Grandma. Feed Goldman. (7) Why are so many workers disabled? (8) Individual income tax receipts are lagging. (9) Global economy is growing. (10) Lots of yuan in China. (11) Worldwide chip sales are down. (12) Still market weighting Semiconductors. (More for subscribers.)