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UniCredit Group and Deutsche Bank Securities say payrolls gains are typically linked with GDP growing close to 3 percent.

Harm Bandholz at UniCredit said the employment numbers are closer to the true picture and ,” expects GDP growth to pick up in half2 and even more in 2014.

Joseph LaVorgna at Deutsche Bank said employee income-tax withholdings were up 6 percent in June compared with a year earlier, the best showing for that month since 2007, after adjusting for the increase in rates that took effect in 2013. LaVorgna said tax receipts are confirming the improving labor market, but GDP is overstating the weakness in output: GDP in half1 2013 was actually decent and half2 will be better.

The Bloomberg Consumer Comfort Index last week matched the highest level since January 2008 and the Thomson Reuters/University of Michigan index reached a 6-year high for July.

Neil Dutta at Renaissance Macro Research said GDP looks increasingly like the outlier relative to other data such as corporate profits, and an overwhelmingly number of signals indicate the economy is doing better than many think.

Jeremy J. Nalewaik at the Fed said research shows that gross domestic income (GDI) is a better gauge of the economy.

Joseph Carson at AllianceBernstein said gains in income and profits signal growth is stronger than currently thought. Carson said GDP increased at a 3.4 percent annualized rate since Q3 2012 before adjusting for inflation, while GDI grew at a 4.9 percent pace, and expects the economy’s growth rate will be revised up for the past few years when the update is released on July 31.

James O’Sullivan at High Frequency Economics said it is certainly credible that the GDP number has been undercounted, and employment data is strong enough already to be consistent with at least a 3 percent pace of GDP growth.

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