LegalShield Economic Stress Index™ Indicates Near-Record Low Consumer Stress, Near-Record High Housing Strength Heading into Winter Months
Source: LegalShield v. Conference Board’s Consumer Confidence Index (October, 2004 – October, 2020)
ADA, Okla.--(BUSINESS WIRE)--Released today, the October 2020 LegalShield Economic Stress Index™, a suite of leading indicators of the economic and financial status of U.S. households and small business, saw its flagship Consumer Stress Index notch its second lowest reading on record while its housing construction and home sales indices reached all-time or near record highs. Despite low consumer stress and strong housing market conditions, consumers and small businesses alike continue to face substantial uncertainty stemming from the public health crisis as the United States enters the colder winter months amid record-high daily COVID-19 cases and economic aid package negotiations stalled in a lame-duck Congress and Administration.
The LegalShield Economic Stress Index™ is comprised of five sub-indices that are constructed from the company’s proprietary data, which reflect the demand for various legal services over the past 15-plus years. The index is based on intakes for more than 1.8 million memberships, including individuals and small businesses, which provide a window into the experiences of families and businesses across the country at any given point in time. Each time a provider law firm receives a request from a customer, the request is logged as an “intake” in one of roughly 70 unique areas of law (e.g., real estate) depending on the nature of the request. The sub-indices that comprise the LegalShield Economic Stress Index were selected because they tend to lead an existing economic indicator that sheds light on the health of the U.S. economy (i.e., the target economic indicator). In this way, the data provides actionable intelligence about the direction of the U.S. economy in the near term.
Highlights from the October 2020 LegalShield Economic Stress Index™ are as follows:
- The Consumer Stress Index ticked down (improved) 1.5 points in October, from 65.6 to 64.1, marking the second lowest reading on record. Meanwhile, Conference Board’s Consumer Confidence Index (the target economic indicator) eased 0.4 point to 100.9, much improved from August but still more than 30 points below pre-pandemic levels. Over the last 15-plus years, the Consumer Stress Index’s data intakes has typically led the Conference Board’s Consumer Confidence Index readings by 1 to 3 months.
- The Bankruptcy Index, a forward-looking indicator of bankruptcy filings, increased slightly in October but remains near historical lows, rising (worsening) 2.0 points from 28.8 to 30.8 for the month, though it remains 11 points below February levels. While bankruptcy pressures are muted, there are potential warning signs beginning to emerge. Americans are reporting that they have already exhausted or will exhaust their emerging savings, while surveys indicate consumers and small business are relying on credit cards more than they would like to make monthly payments.
- The Foreclosure Index improved in October, reflecting muted foreclosure activity. The index declined (improved) 6.3 points from 36.7 to an all-time low of 30.4 in October. The outlook for foreclosure activity has improved with a healing labor market, which has recovered more than half of the jobs lost in March and April. However, without additional targeted federal assistance, foreclosure activity may rise during the first half of 2021 if renters are unable to pay their bills. This, in turn, could create debt-servicing issues for owners of rental properties.
- The Housing Construction Index improved once again in October, jumping 6.4 points from 134.7 in September to an all-time high of 141.1 in October, driven by a decline in the Foreclosure Index. Although the homebuilding industry still faces headwinds such as a shortage of buildable lots and the high cost of input materials, historic demand for single-family homes has outweighed these factors, and LegalShield data (as well as other economic data) corroborate this development. For example, housing permits for single-family homes jumped to 1.2 million in September, according to the Census Bureau — up 7.8% from August’s level and 24% from a year prior.
- The Housing Sales Index inched up 1.1 point from 112.5 in September to 113.6 in October, the strongest reading since November 2005. Meanwhile, existing home sales surged 9.4% in September to the highest level since May 2006 and are up 21% year-over-year. Few industries have experienced a pandemic-era resurgence like real estate, in part because of rock-bottom mortgage rates, which have held well below 3% since early August.
Commenting on the LegalShield Economic Stress Index™ October results, CEO Jeff Bell said: “Despite the historic economic downturn, consumer financial stress is largely muted due to the federal government’s emergency actions. However, many CARES Act provisions have now expired while winter is coming amid rising coronavirus cases. Millions of Americans are looking to Democrats and Republicans to come together to pass a targeted package of stimulus measures to help the consumers and small businesses most in need. Almost certainly, President-Elect Biden will inherit one of the most precarious economic landscapes of the last century. While we now have a lame-duck Congress and lame-duck President, we cannot simply wait until next year to begin to address the challenges facing the country today. We need our elected leaders to find common ground and act now.”
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Doug Donsky (ICR, Inc.)