Suddenly, the new year is looking a bit brighter — at least in the eyes of most economists and investors.
On Day 1 of 2013, Congress voted to veer away from the "fiscal cliff" by passing a package of provisions that avoided broad tax hikes and big spending cuts. And on Day 2, stock prices shot up.
Yes, there will be new budget battlesin February, after President Obama has had his second inauguration and the 113th Congress has gotten itself organized.
But for now at least, Americans can take some comfort in having more policy certainty about taxes. And that helps businesses with their planning for the new year, according to John Canally, an economist for LPL Financial, an investment-adviser consulting firm.
Like most other economists, both Hopkins and Canally say growth will continue in 2013, but not by a robust pace. That's because part of the legislation passed Tuesday by Congress will end the payroll tax holiday, which had been in place for two years. That will reduce take-home pay for all workers.
The payroll tax comes back now and that will affect everyone right away," Canally said. "It will be a drag on the economy" because the typical household will have roughly $1,000 less to spend this year, compared with 2011 and 2012.
On the other hand, the rebuilding efforts in parts of the country hit by Hurricane Sandy this past autumn will generate jobs and spending, he noted. On balance, the economy should grow at about 2 percent in 2013, which would be roughly the same pace as 2012, he said.
That forecast is in line with other mainstream economists. The consensus is that growth will be well below the 3 to 4 percent expansion rate that would generate strong job growth and better incomes. But it should be enough to continue to whittle down the 7.7 percent jobless rate and keep the recovery growing into its fourth year. Utah Public Radio
