Widening Consumer Stress Gap Hints at Incumbent Party Advantage

News - May 30, 2024
CSLI Political Breakdown: Election Year Focus chart

By Matt Layton, LegalShield Senior Vice President of Consumer Analytics

As LegalShield’s senior vice president of consumer analytics, I spend a lot of time digging into the unique data we have on the legal and financial stressors facing everyday Americans. Our data comes directly from over 35 million requests from consumers seeking legal help since 2002 on issues spanning personal finances, foreclosures, bankruptcies and more.

This election cycle, we’re taking a close look at how consumer stress levels vary geographically between red, blue and purple battleground states. What we’ve found so far is quite fascinatingthere appears to be a widening gap between consumer stress in battleground states versus the national average. And historically, this divergence has signaled which party will win the White House.

The numbers don’t lie

LegalShield CSLI up 4.5% Year Over YearIn April, our Consumer Stress Legal Index (CSLI) rose 2.4 points nationally to 63.8. This benchmark index has been a reliable leading indicator of the widely followed Consumer Confidence Index, with an inverse correlation of -0.85. As consumer legal stress rises, confidence tends to drop around 2-3 months later.

Sure enough, April’s Consumer Confidence reading fell 7.7 points to 97.0 after our CSLI ticked up. The drivers were higher inflation persisting at 3.4% annually despite the Fed’s aggressive interest rate hikes, a mixed jobs report, and consumer finance issues on the rise.

But the real story is in the battleground states data. In April, the margin between lower consumer stress in swing states and the higher national index more than doubled to 3.1 points. Swing state stress rose just slightly to 60.7, while the national index jumped to 63.8.

This widening gap is important because our data over the past 20 years shows a clear patternwhen battleground states have exhibited lower relative stress levels, a Democrat was elected president in 2008, 2012 and 2020. Conversely, when swing states had higher stress than the nation, a Republican won in 2004 and 2016.

Bankruptcy filings a bellwether

Breaking it down further, all three subindices that make up the CSLIConsumer Finance, Bankruptcy and Foreclosuremoved higher in April after declining in March.

The Bankruptcy Index jumped to 31.1, up 35% year-over-year. This is significant because LegalShield’s Bankruptcy data has historically led actual bankruptcy filings by two quarters with a 0.98 correlation. After a sharp drop during the pandemic relief fundings, consumer bankruptcies appear to be creeping back towards pre-pandemic levels.

The volume of billing disputes LegalShield is seeing is another red flag on the consumer finance front. April calls about billing issues were the second highest ever recorded after the March 2021 peak.

While foreclosure stress did rise 2.2 points, that index remains 4% lower than last year and below the two-year average. So, housing issues are not the current driving factor behind rising consumer angst.

My projection: Advantage incumbent?

CSLI Political Breakdown: Election Years 2004, 2008, 2012, 2016 and 2020As a data analyst, I need to caveat that it’s still very early in the election cycle and consumer sentiment can certainly shift in the months ahead. Economic conditions, inflation, jobs numbers and interest rates will all play a role.

However, if the current trend of lower relative stress in battleground states versus the nation persists, history suggests that could favor the incumbent party retaining control of the White House.

Of course, this is just one economic data point. But it’s a very telling one from the trenches of consumer financial and legal affairs. The diverging gap warrants close watching through early November.

Here’s where you can read the latest report, April’s Consumer Stress Legal Index.