Posted on Thursday, June 4, 2026
In May, we observed an increase in growth of federal tax withholding–that is, the overall amounts of income and payroll taxes that employers withhold from workers’ paychecks and remit to the Treasury Department as soon as the day after the workers are paid. We estimate that withholding growth was 6.4 percent on a year-over-year basis–that is, comparing the amounts in May 2026 with those from May of a year ago. That was faster than the 4.0 percent growth in April and a bit faster than the 5.4 percent growth averaged between January and March of this year (all measures compared to the comparable periods of a year ago). The average rate of withholding growth in April and May, at 5.2 percent compared to the same months of 2025, suggests overall wages and salaries growing above the rate of inflation and an economy continuing to grow despite some headwinds this year.
Some of the move up in withholding growth in May could be related to the early Memorial Day this year, the earliest it can occur. Our measurement methodology attempts to standardize the makeup of days across months and adjust for holidays (along with removing the estimated effects of tax law changes), but the early Memorial Day may elude our calendar adjustments. The last time that Memorial Day was that early was in 2020, a year for which it is hard to compare much of anything to. The time before that was in 2015, when withholding growth for May was a bit larger than in the months around it, so it is possible the early Memorial Day has some effect on withholding separate from our adjustment technique. In any event, we will see if the move up persists in June.
