A survey released Friday shows Americans' outlook for the economy perked up in late January, suggesting an improving job market may blunt the impact of higher taxes.
A survey released Friday shows Americans’ outlook for the economy perked up in late January, suggesting an improving job market may blunt the impact of higher taxes.
The University of Michigan’s final January survey of consumer sentiment rose to 73.8. That’s up from a preliminary reading of 71.3, released on Jan. 18. And it’s slightly better than December’s reading of 72.9.
The preliminary survey reflected consumers’ initial reaction to an increase in Social Security taxes, which took effect in early January. A separate survey from the Conference Board also showed consumer confidence fell in January because of the tax increase.
On Friday, the government said the economy added 157,000 jobs in January and hiring was stronger at the end of 2012 than previously thought.
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The final Michigan survey, which included data collected after Jan. 18, showed consumers were more optimistic about their prospects for the next six months than they were in December. Still, their mood about current conditions declined from December.
Richard Curtin, chief economist for the survey, said the tax increase was the main reason consumers, particularly those from lower-income households, felt less confident about current conditions.
Social Security taxes rose after a temporary cut, in place for two years, expired Jan. 1. The increase means a person earning $50,000 a year will have about $1,000 less to spend in 2013. A household with two high-paid workers will have up to $4,500 less.
Economists said they were looking for modest improvements in consumer confidence in coming months as long as job growth keeps improving.
“After getting slammed in December, consumer confidence is starting to stabilize,” said Chris G. Christopher, senior economist at Global Insight.