The Payroll Tax Hike and Higher Gasoline Prices

Mark Thoma catches Tim Duy who catches an analyst saying:

“”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.”

The level of consumer spending went to post-crisis records in November and December, and remained strong into January. This is great news, but I fear the hike in gasoline prices plus smaller paychecks will mean we have a recession in the works.

Gasoline prices are ticking up again after falling for months. Gas has gained about $.22 per gallon in just a few weeks. This is a very dramatic increase.

Remarkably, every year for the last 2 years, we’ve had a significant increase in gasoline prices begin sometime in Q1. In 2011, gas prices jumped $.50 per gallon in just a few weeks in early February. Then, in 2012, gasoline started its massive upwards move in February.

I fear we might be seeing a repeat of this seasonal cycle, and this could push us into recession.






Expert in business development, product development, and direct marketing. Developed strategic sales plans, product innovations, and business plans for multiple companies. Conceived the patent pending Spot Equivalent Futures (SEF) mechanism, which allows true replication of spot and swap like products in the futures space.

View all posts by

Leave a Reply

20 Comments on "The Payroll Tax Hike and Higher Gasoline Prices"

Notify of

4 years 3 months ago

Remember, Performance Reviews are this Quarter.
I am waiting to see how many companies actually start giving more that the .05%-1.5% now that the payroll tax break is gone.
If companies return to the 1.5-3% range then it would be a great case study for govt involvement vs company with regards to peoples take home.
Should be interesting.