As you may recall, earlier this year, payroll taxes in the U.S. went up by 2% and I discussed how that tax increase could potentially affect spending. Well, we’re done with first quarter, so how have consumers reacted to that $16 less (based on average weekly earnings on non-farm payrolls) in take-home pay each week?
- Consumer spending increased the first two months of the year (up 0.7% in February and up 0.4% in January).
- Consumer confidence took a temporary hit in January, and then generally recovered in February and March.
And, here’s the real kicker, according to a survey recently done by Bankrate.com, almost half of Americans surveyed (48%) didn’t even notice the payroll tax increase. Read more
Back in the late nineteenth century, the field of economics gave birth to the term Homo economicus (roughly, “economic human”). With all the new economic models and ideas that were being thrown around at the time, economists needed a stand-in for John and Jane Doe – some anonymous person who could serve as the rational, self-interested individual that their models required. This was Homo ecnomicus – a play of sorts on the Latin taxonomy used to classify all living organisms. The rest of us humans are just plain old Homo sapiens.
Over the last several months, a growing divergence between the economic outlooks of consumers and businesses in the United States has made it feel like Homo economicus was splitting into two different subspecies; one confident, and the other pessimistic. One of these subspecies, however, may be doomed to extinction. Read more