Americans are stressed, relatively pessimistic and unsure about where the economy going into a presidential election year.
Those are the unsurprising findings from the CredAbility Q2 Consumer Distress Index. The latest data reflects an average score of 69.20 on the index's 100-point scale. Given that any number below 70 indicates financial distress, it is clear that even after a third consecutive quarter of improvement in the index, the average consumer is experiencing a crisis of confidence.
And it's not hard to understand the root causes of our distress. The CredAbility Consumer Distress Index represents a composite of employment, housing, credit, household budget and net worth data that combine to offer a barometer of our financial health as well as household security.
Of these five elements, employment is dragging down the average. With a score of 54.4, employment qualifies for the index's lowest "emergency crisis" rating in almost every state in the nation.
When asked how important job creation and lowering the unemployment rate are to getting the index above the 70 point distress threshold next quarter,
Certainly the anemic housing market has failed to boost consumer sentiment, especially in a number of the top 10 most distressed states like
"If you don't have a safe, stable income, what kind of housing can you have?" he said. "Whether it's the chicken or the egg, both numbers are bad. There's steady progress but not nearly enough," he explained.
Despite the gains of the last three quarters, the second quarter of 2011 remains the 11th worst reported period in the index's 31-year history. Still, the index identified at least one positive trend that bodes well for an eventual climb out of distress. Whereas the first decade of this century was characterized by cheap and easy credit that allowed people to live beyond their means, in this decade family budgets are being retrenched, and that is helping to repair household balance sheets.
"Many people have made the tough choices needed to live within their means," Cole noted. "They are paying their bills on time and getting their expenses in line with their income. Unemployment and underemployment continue to cause hardships for millions of families and weigh heavily on the confidence of the nation. But a positive emerging trend is that families are handling their personal finances more wisely."
While Cole hesitates to make predictions, cautioning that "we didn't design the stress index to be predictive," it seems clear that without a real plan to put the unemployed back to work in stable industries, consumer confidence will continue to languish.
And that's quite a quandary for an economy that for several decades has been driven by consumer spending.
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