WSJ: Modest Hiring, Eroding Take-home Pay Fueling Consumer Blues

Tuesday, 11 Dec 2012 09:02 AM

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Sluggish hiring, weak take-home pay and fears taxes will rise either as part of a deal to avoid the fiscal cliff or from actually going over the cliff are all dampening an already sluggish recovery by bruising consumers’ moods, a Wall Street Journal analysis of government data finds.

The U.S. economy may have added a net 146,000 nonfarm payrolls in November, well above expectations for around 80,000 new jobs, but the September and October numbers were revised downward, bringing job growth to an average of 139,000 per month over the last three months, not enough to absorb those out of work on top of those entering the labor force for the first time.

Elsewhere, consumers remain worried over the fiscal cliff, a combination of tax hikes and spending cuts due to take effect at the same time at the end of this year.

Editor's Note:
Make 2013 the Year You Pay Zero Taxes

Congress and the White House are working to avoid the cliff, yet a compromise would likely involve tax breaks expiring on the wealthy, many of whom are small business owners who might put off plans to hire next year as a consequence.

Such fears helped push the Thomson Reuters/University of Michigan preliminary index of consumer sentiment to a seasonally adjusted 74.5 for December, well below 82.7 in November and below market forecasts for a reading of 82.4.

Consumer spending drives about 70 percent of the U.S. economy.

“Worries about the fiscal cliff figured prominently in the survey responses, with 25 percent making negative references to the likelihood of higher taxes,” Goldman Sachs economists wrote in a research note, according to The Journal.

Other economists agree that the fiscal cliff is taking its toll on the country by keeping consumers on the sidelines to fret over their futures.

“The fiscal cliff is going to bum people out,” said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Conn., according to Bloomberg.

“The consumer had held up pretty well into the summer and early part of the fall and in particular consumer attitudes had been super strong. My fear is that’s going to fade a little.”

Editor's Note: Make 2013 the Year You Pay Zero Taxes

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