Posted on August 23, 2021
We look closely at the quarterly releases from the Bureau of Labor Statistics (BLS) on wages and salaries for the quarter ending about five months prior, 2021Q1 in this case. The data come from the the Quarterly Census of Employment and Wages (QCEW)–more on where the data come from later. We care because the amount of economywide wages and salaries is one important measure of the state of the economy. However, it is hard to draw any conclusions from the QCEW release of this past week.
We estimate that the partial QCEW data release of last week–the full data release is scheduled for the beginning of September–is consistent with economywide wages and salaries being flat in 2021Q1 compared to amounts in the same quarter of a year ago (see chart below). That compares to about 3 percent growth in wages and salaries as measured in the National Income and Product Accounts (NIPAs). The bigger divergence, however, is that tax withholding data, as we measure it, was up by about 6.5 percent in the first quarter compared to the first quarter of 2020. We had been expecting based on the tax withholding data, which tend to track wages and salaries, that the NIPA amounts of wages and salaries might be revised up for 2021Q1 in the release scheduled for Thursday of this week. Now we wonder whether the NIPA amounts might be revised down instead, because the NIPAs use the QCEW data as a primary source when they become available. However, it’s all inconclusive in my opinion because the QCEW data occasionally jump around based on calendar and other effects, as is evident from the history of the series. So, the next step is to see if there are any revisions this week to the historical NIPA data, the best measure of quarterly economywide wages and salaries.
For a little background, the QCEW data are high quality because they are administrative data. That is, the data don’t come from a survey like the monthly labor market surveys from BLS that move financial markets generally on the first Friday of the month, but instead the data come from reports that nearly all employers are required to submit to state governments for the purpose of administering the unemployment insurance system. The reports include the amount of unemployment taxes withheld from paychecks, wages paid, and employment. However, the QCEW data can jump around based in part on how many business days and paydays there are in the quarter. It’s similar to the problem that we confront when interpreting the daily data on tax withholding remittances made by employers to the Treasury, which jump around from day to day and month to month also based on the interaction of the calendar and payday schedules. We will see with the NIPA revision later this week how the Bureau of Economic Analysis, which compiles and releases the NIPAs, interprets the new data from the QCEW.