Posted on July 3, 2024
Federal tax withholding–the combined amount of income and payroll taxes withheld from workers’ paychecks and remitted daily to the U.S. Treasury–continued to increase at a solid, healthy pace in June. Based on data released daily by the U.S. Treasury Department, we estimate that the amount of withholding in June was 5.8 percent above the amount from June of a year ago (so-called year-over-year growth), continuing within the relatively narrow band of 5 percent to 7 percent year-over-year growth that we have measured in almost all months since May 2023 (see the chart below). In constructing those growth measures, we adjust the reported amount of withholding in two ways: standardizing the makeup of business days across months (which otherwise can affect the reported amounts and growth rates significantly); and removing the estimated effects of tax law changes (with no such adjustment currently needed).
Because withholding on our adjusted basis moves largely with overall wages and salaries in the economy, we expect that wages and salaries are also continuing to grow at a steady, solid pace (again, see the chart below). The first government read on economywide wage growth in June will be available in the employment report for the month to be released by the Bureau of Labor Statistics on Friday of this week. The more comprehensive measure of overall wages for June will be released by the Bureau of Economic Analysis late this month (in the GDP report), with the data subject to significant revision.
