This one is no April Fool's joke: According to TrimTabs, the economy has been in a recession for six months now. And, it has already emerged from the recession (or is about to).
The basis for this somewhat startling set of conclusions? Withholding Income Tax receipts, online job listings, and several other factors.
I highly doubt both the methodology and conclusion TrimTabs has reached. It has to do with the way Trimtabs looks at the annual withholding data. "According to Madeline Schnapp, director of macroeconomic research at TrimTabs, withholdings during March were 4.1% higher than one year ago."
That is, to be blunt, an absurd basis for making such a conclusion.
Well, it fails to consider prior rates of change. As we noted last week, the year-over-year Changes in US Withholding Taxes have been trending considerably lower. Merely taking a single data point -- such as 4.1% -- without providing any context is just plain foolish. What is the significance of that number? Is it good, bad or indifferent? How does the data compare to the prior March's year-over-year gain?
The answer is not encouraging: It's up a whole lot less than March 2007.
Here's the latest chart:
I GOT YOUR 4.1% RIGHT HERE:
To think, Goldman Sachs (NYSE:GS) recently bought a minority stake in TrimTabs (I guess they are no longer the smartest house on the street).
There are two other factors to consider regarding the TrimTabs model (though I think that first one above is fatal):
First, the 2003-2007 post-recession recovery was the historically weakest in terms of job creation since WW2. Thus, we should not expect the raw numbers of layoffs to parallel prior cycles. Job listings, which have a much shorter data history, should be similarly anomalous.
Second, Gross Domestic Income [GDI] has done a substantially better job recognizing the start of the last several recessions than other factors, such as GDP. And, GDI recently suffered its biggest drop since 2001.
Based on that, the recession likely began in December -- not October.
Changes in US Withholding Taxes
Monday, March 24, 2008 | 07:12 AM
Good and bad economic news
MarketWatch, 11:29 p.m. EDT April 1, 2008
Did Economy Really Escape Fourth Quarter Drop?
WSJ Real Time Economics, March 27, 2008, 2:02 pm