Americans take payroll-tax increase in stride to keep spending

Americans are saving less and spending more for purchases such as new automobiles, as household net worth climbs with rising home values and stock indexes surging to record highs.

Consumers and businesses are treating higher payroll taxes and federal spending cuts as just a speed bump for a U.S. economy poised to accelerate later this year.

Americans are saving less and spending more for purchases such as new automobiles, as household net worth climbs with rising home values and stock indexes surging to record highs. Companies are ramping up hiring, adding 246,000 to private payrolls in February. They're also expanding investment and rebuilding inventories as they put profits accumulated during the recovery to work.

"A lot of things are going the right way," said Brian Jones, a senior U.S. economist at Societe Generale in New York, whose private employment forecast was closest to the February gain among economists surveyed by Bloomberg. "The labor market is picking up momentum. Businesses are seeing demand. More people working means more people will be spending money. To a certain extent, this neutralizes the effects" of higher taxes.

Growth will pick up in the second half of the year as the fallout from the budget cuts dissipates, paving the way for even stronger spending by businesses and consumers, projections from Barclays Plc and JPMorgan Chase & Co. show. Gross domestic product will rise at a 2 percent annual average pace in the latter six months of 2013 after a 1.5 percent rate in the first two quarters, said Dean Maki, chief U.S. economist at Barclays.