As of July 11, the 4 week average of the 10 day total of withholding taxes is now up 4.0% in nominal and 1.8% in real terms versus the same period in 2011 (adjusted by the monthly BLS data on average weekly employee compensation which in June rose by 2.2% year to year). This indicator has been in the +1% to +3% range since mid May, with most of that time above +2% suggesting that the economy's current rate of growth is 2-3%, not the 1-1.6% that most Wall Street conomists are now forecasting.

This actually suggests to us that inflation is "weighing in" more than generally understood. 1.8% growth in "real terms" doesn't give a lot of wiggle room for dishonesty; and we're quite sure inflation is more than 1.8% worse than reported by the government.

So, Lee is right that the economy is probably not falling in nominally, or "government adjusted" real terms. But we suspect it is shrinking in "real" real terms.

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