As you probably noticed from looking at your first paycheck in January, the payroll tax went up as a result of the fiscal cliff negotiations between the president and Congress. Most of us saw our real wages decline because of this. And that wasn’t the only negative effect: Some people feared that the loss in purchasing power would serve as a drag on the entire economy.
Fortunately, it hasn’t had a strong impact yet. Retail spending, which would really feel the impact of the lower paychecks, still rose 0.1 percent in January, despite the fact that most American’s real incomes declined slightly.
That figure is still down from the 0.5 percent increase we saw in both November and December, although those numbers were boosted by holiday spending. While we’d like to see it higher than 0.1 percent, at least it’s moving in the right direction.
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