Bottom Line: Breaking with the pattern of recent weeks, this week’s withholding was slightly above the comparable week in 2019. Because weekly withholding data is noisy, it is too early to draw any conclusions from this one week reversal.
California employers are required to make regular income tax withholding payments for their employees, which can provide a real-time indication of the direction and magnitude of the aggregate change in the employers’ payrolls. Most withholding payments are for employees’ wages and salaries, but withholding is also due on bonuses and stock options received by employees. We caution against giving too much weight to withholding numbers in any given week because a single anomalous day can result in numbers that are difficult to interpret. Nonetheless, given the pace and possible severity of the shift in the state’s economy resulting from the COVID-19 outbreak, tracking weekly withholding is worthwhile as a way to assess the state’s rapidly changing economic situation.
The first graph compares withholding payments received this week to payments received in the comparable week in 2019, which ran from Monday, April 15 to Friday, April 19 of that year. Breaking with the pattern of recent weeks, withholding this week was about 5 percent above collections during the comparable week in 2019.
The second graph compares the year-over-year percent change in withholding (withholding this week relative to the same week in 2019) to average weekly decline experienced in March and April of 2009, when the state was in the depths of the Great Recession. As with the graph above, this week’s collections appear to be a bit of a deviation from the pattern of recent weeks.
The final graph compares withholding payments so far in the 2019-20 fiscal year to 2018-19. As of now, year-to-date payments in 2019-20 remain ahead of 2018-19.