Looking at the Reuters report on the latest consumer confidence numbers, this caught my attention:
“The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.
One of the more interesting anecdotes I picked up last week was from a businessman who said that after his firm issued the first paychecks of the year, virtually every employee came to the payroll office and asked why their paychecks were lower, evidently unaware that the payroll tax cut had expired.
If the expiration does come as a surprise to a large proportion of the workforce, perhaps consumer spending in the first quarter will be somewhat softer than current estimates. Something to watch for.
This piece is cross-posted from Economist’s View with permission.