The National Retail Foundation estimates seven out of every 10 consumers plan to reduce their spending because of the increase in payroll tax, enacted at the beginning of the year. Nearly 60 percent of Americans surveyed by the organization say the tax increase will affect their spending, saving and budgeting plans for the upcoming year.
Young adults and those who earn less than $50,000 annually expect to be hit hardest by the increase, which raised the federal payroll tax from 4.2 percent to 6.2 percent.
Retailers in New Jersey, as well as related industries, are preparing for another potential dip in consumer activity.
One of the first industries expecting to see an impact from consumers’ decreased discretionary income is restaurants. The NRF says nearly a third of all adults plan to cut down on dining out as a result of less take-home pay.
“Restaurants are what people use their discretionary money on,” said Marilou Halvorsen, president of the New Jersey Restaurant Association. “They might scale down where they eat, maybe not as often. Any time you take away people’s discretionary money, it will affect their spending. It has that trickle-down effect.”
Halvorsen said she hopes any decline in patronage at her membership’s eateries is “a momentary lapse” in what has always been a strong industry for the state.
“Restaurants operate on a very slim profit margin,” Halvorsen said. “It’s not like their profit margins are so padded that they can sustain a dip, even a small dip.”
Another industry preparing to deal with different spending habits is retail real estate. Matthew Harding, president of Levin Management, in North Plainfield, said while the industry is still seeing a lag in the effect of the payroll tax increase, that hasn’t caused the issue to fly under the radar.
“It’s early — we haven’t had much feedback directly from our retailers on the impact of that tax,” Harding said. “However, the mood is less discretionary income, the greater impact there could be on sales, as retailers are trying to continue to build their businesses.”
At their New Jersey properties, Harding said Levin has experienced strong leasing demand at the strongest centers, and expects them to continue to perform well. He also said a popular trend is to add service-oriented businesses to shopping centers. The company recently expanded an independent nursing school in Ewing to 30,000 square feet of space in a shopping center that also includes a grocer, a Dollar Tree and a Marshalls.
“The tenant mix is becoming a little more diverse … to bring traffic into the shopping center and to absorb vacancy,” Harding said. “It adds different uses to the properties.”