Posted on September 3, 2024
Growth in federal tax withholding–the combined amount of income and payroll taxes withheld from workers’ paychecks and remitted daily to the U.S. Treasury Department–ticked up in August. Based on data released daily by the U.S. Treasury, we estimate that the amount of withholding in August was 5.2 percent above the amount from August of a year ago (so-called year-over-year growth). That is slightly above the 4.8 percent year-over-year growth in July, but still at the bottom end of the range of 5 percent to 7 percent year-over-year growth that we have measured in most months since May 2023 (see the chart below). We had measured year-over-year growth at 6.2 percent in May 2024 and 5.8 percent in June, near the middle of the recent range. In constructing our 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, though no such adjustments have been needed in recent months.
Because federal tax withholding moves largely with overall wages and salaries in the U.S. economy, we expect that wages and salaries grew more slowly in the past two months than previously, but still at a relatively solid rate (again, see chart below). The withholding data certainly are not indicating any significant recent slowing in the overall economy. The first government read on wage growth in August will be available in the employment report for the month to be released on Friday of this week by the Bureau of Labor Statistics. The more comprehensive measure of overall wages for August will be released by the Bureau of Economic Analysis late this month in its GDP report, though the wage and salary data are subject to much revision.
