Dec

30

Jobs: Rebirth, from Bill Rafter

December 30, 2025 |

Monitoring the U.S. economy through job growth has been unusually difficult in recent months. Under normal circumstances, the labor data would offer a clean read on economic momentum. Instead, a politically driven government shutdown temporarily removed millions of workers from payrolls, distorting every major employment indicator. The strategy failed to achieve its political aims, but it forced millions of Americans to forgo paychecks until the shutdown ended—leaving analysts with a statistical mess to untangle.

The central question now is straightforward but critical: How much of the current job growth reflects genuine economic expansion, and how much is simply the reinstatement of furloughed workers—or seasonal part-time hiring for the holidays?

The next Non-Farm Payroll Report arrives Friday, January 2, 2026, and for the first time in months we may get a clearer signal. Our estimate points to a substantial increase in jobs, driven entirely by the behavior of Payroll Tax Receipts, which have long been our most reliable real-time indicator of labor market strength.

After a period of negative growth, Payroll Tax Receipts have turned sharply upward. As shown in the accompanying chart, the leading indicator (red line) has lagged the actual receipts (blue line) during the shutdown distortions, but is now crossing above and beginning to lead the series higher. This is not a temporary blip. It marks the beginning of a multi-year positive trend—one we forecasted months ago and which is now unfolding exactly as expected.

Our estimate for the January 2nd NFP Report: +162,000 jobs

If this projection holds, it will confirm that the underlying economy has regained its footing and that the Payroll Tax Receipt signal is once again pointing the way forward.

Sorry — 4.3% GDP Growth Isn’t Real

Several major outlets (Bloomberg, CNBC, Axios) recently reported that the U.S. economy grew at an annualized 4.3% pace in Q3 2025. The number comes from a delayed BEA release (12/23) that extrapolated partial quarterly data into an annual rate. But that headline figure simply doesn’t match real-time economic activity.

Payroll Tax Receipts Tell the Truth
Our most reliable indicator of economic momentum has always been Payroll Tax Receipts. They reflect actual wages and actual jobs — not model-based projections.
Here’s what the tax data shows:
During Q3 2025, Payroll Tax Receipt growth was never positive.
Annualized growth for the quarter averaged 1.42%, and that’s looking back over a full year.
Current annualized growth through Christmas 2025 is under 0.5%.
Those numbers are nowhere near 4.3%.

Why the BEA Estimate Misleads
The BEA’s figure is:
Annualized — multiplying a partial quarter by four
Distorted by the government shutdown, which delayed data collection
Contradicted by real-time tax flows that never showed a surge
Even the BEA notes this is an initial estimate, replacing two missed releases. It is unusually fragile and backward-looking.
Interpretations Will Vary — But the Data Doesn’t

Some may speculate that an unexpectedly high GDP print could influence monetary policy by suggesting renewed inflation pressure. Whether or not one believes that, the conclusion is straightforward:

The 4.3% GDP claim cannot be supported by real economic data.
Payroll Tax Receipts — the cleanest, least-manipulable indicator we have — show growth well under 1%, not 4%.

Larry Williams adds:

One of the best predictors of jobs is the stock market, which is also forecasting more people back to work.


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