LegalShield’s Economic Stress Index from May 2022 illustrated that consumers are beginning to feel financially strained and are potentially entering a season of heightened borrowing costs and stress.
A historically tight labor market has precipitated strong wage growth, with a 5.2% bump in average wages, but inflation has outpaced this advancement. When adjusting for inflation, wages actually declined throughout most of the last year while the cost of household staples like food, gasoline and utilities have risen sharply. These price increases have not yet produced an increase in overall consumer stress, but they have affected consumer behavior.
“We’ve been keeping a close eye on how consumers are responding to the market during this tough economic time in our history and have noticed it getting worse month over month,” said Matt Layton, SVP of Data, Insights, and Intelligence at LegalShield. “Americans are slowly beginning to feel the financial weight impact their daily lives, their financial decisions and how and where they’re going to spend their money.”
The LegalShield Bankruptcy Index dipped in May 2022 and LegalShield expects bankruptcies to remain low for the near future because of the strong labor market. Total seasonally adjusted bankruptcy filings decreased by 2.3% in May, down 19% from the prior year.
Foreclosures have been easing back into pre-pandemic levels as government support programs expire, but continue to be low when compared to historic levels. While the LegalShield Foreclosure Index improved by 4.4 points in May, foreclosure starts increased 0.17% during the first quarter of this year. A robust labor market and increasing home prices forecast that a quick increase in foreclosure activity would be unlikely.
While high demand for homes has continued to boost the housing construction market, rising mortgage rates and materials costs are expected to slow activity soon. Housing sales have also begun to slip. The LegalShield Housing Index decreased 2.8 points last month to 110.5, nearing summer 2020 levels. Existing home sales were down 2.8% in April and down 5.9% when compared to last year’s levels. Sales are still expected to remain healthy, but housing affordability is a growing concern and new home sales are not expected to rebound any time this year.
