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Even with the gains, many economists expect growth has slowed slightly in the current April-June quarter to around 2 percent and is likely to stay around that reduced level for the rest of this year. One reason is that higher Social Security taxes may be starting to catch up with consumers. While spending surged from January through March, it began to show signs of slowing toward the end of the quarter. Spending at retail business fell in March by the largest amount in nine months. The tax increase kicked in on Jan. 1 and has cut take-home pay for most Americans. A person earning $50,000 a year has $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less. Also weighing on growth this year are deep automatic federal spending cuts. Federal agencies have been forced to furlough workers and make other cutbacks to stay within their reduced budgets for this year. Steady job growth could offset some of the fiscal drag. The economy has added an average of 208,000 jobs a month from November through April. That's up from only 138,000 a month in the previous six months. The job gains could provide consumers with more money to offset the impact of the tax increase. Total wages rose 3.6 percent in April compared with a year earlier. That's comfortably ahead of the 1.5 percent inflation rate.
[Associated
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