2008 record      

 

Americans’ stress related to their finances saw its largest decline in more than four years this month, easing off an 11-year high reached in April, as the federal government’s historic $2.2 trillion relief package helps soften the economic impact of the coronavirus outbreak for many households, and states move to relax lockdown measures, according to the May reading of the Investor’s Business Daily/TIPP Financial-Related Stress Index, a monthly measure of Americans’ views on the state of their finances. Despite the sharp drop, the index remains in negative territory for the third consecutive month, as job losses resulting from the coronavirus crisis continue to mount, fueling concerns over job security among the overall population.    

The IBD/TIPP Financial-Related Stress Index fell by 5.8 points, or 8.3 percent, in May, to a reading of 64.0, the biggest monthly drop since October 2015. The decline comes after a 36.1 percent surge last month, which brought the indicator to its highest level since December 2008, when the country was in the midst of the Great Recession. However, May marks the third straight month in which the index has posted a reading above 50, an indication that Americans feel more stressed over their finances these days. Also, the index is 27.8 percent above last May’s reading of 48.4, highlighting the vast toll the coronavirus crisis has taken on Americans’ sense of financial security. 

The easing in financial stress levels was broad-based. In May, all 21 demographic groups that Investor’s Business Daily and TechnoMetrica monitor each month posted declines in the index. This is a complete reversal from April, which saw all groups report higher levels of money-related stress. Still, all segments continue to linger above 50.0 for the second month in a row. An index reading above 50.0 indicates that Americans feel more stress over their finances, while a score below 50.0 means less financial stress. A reading of 50.0 is neutral. 

Among regions, the South posted the largest decline in the index this month, falling 10.6 percent to a score of 63.1. The Midwest also exhibited a sizable drop in financial stress, from 67.6 in April to 61.6 in May, an 8.9 percent retreat. The West was not too far behind, with a 7.4 percent dip in the index, from 68.9 to 63.8. Meanwhile, the Northeast, which continues to bear the brunt of the coronavirus outbreak, posted a more modest decline of 3.5 percent, from 71.9 to 69.4.

Interestingly, among income groups, households earning less than $30,000 a year reported the greatest drop in the index, plunging 12.3 percent to a reading of 60.3. Meanwhile, the $50,000-to-$75,000 income cohort saw its index fall 6.8 percent, from 66.5 to 62.0, households making $75,000 or more declined by 6.6 percent, from 71.6 to 66.9, and those earning between $30,000 and $50,000 a year posted a 6.5 percent drop, from 67.6 to 63.2. 

The widespread waning of financial stress has been prompted by the growing expectation that the U.S. economy will soon reopen, as many states move to ease lockdown measures put in place to contain the spread of the coronavirus outbreak. By May 1, 35 states had begun loosening coronavirus-related restrictions to allow more businesses to reopen. Some states such as Georgia and Florida have allowed restaurants and retail shops to reopen at limited capacity. Encouraged by this news, major retailers are moving to reopen their stores throughout the country. Macy’s, the largest department store operator in the U.S., recently announced plans to reopen all of its 775 stores within six weeks. 

Americans’ financial security also received a boost from the $2.2 trillion coronavirus aid package, the largest emergency relief deal in the country’s history. The package includes direct payments of $1,200 for individual taxpayers earning up to $75,000. The IRS, which began sending the stimulus checks in the middle of April, estimates that 150 million individuals qualify for the one-time payment. The aid package also expands unemployment benefits to include part-time workers and the self-employed and provides an additional $600 of benefits per week for individuals filing for unemployment.

The stimulus provides much-needed relief to Americans amid a wave of job losses triggered by the coronavirus crisis. More than 33 million Americans have filed jobless claims since the outbreak began gripping the nation’s economy seven weeks ago. Meanwhile, the unemployment rate soared to 14.7 percent in April, the highest since the Great Depression. Our survey provides further insight into the devastating toll the coronavirus has taken on U.S. jobs and incomes. More than two in five (43 percent) Americans have lost their jobs or work hours as a result of the coronavirus outbreak, up from 38 percent in April. Also, 42 percent of U.S. households have at least one member who is currently unemployed and looking for a full-time job, which is down from 47 percent in April, but significantly higher than the 14 percent share reported in March, before the crisis began. Further, the spike in layoffs has led to increased job insecurity among the wider U.S. population, with 44 percent expressing a concern that they or a member of their household will be laid off within the next 12 months, compared with 14 percent in March. 

Thus, economic relief from the federal government will be critical for many households to stay afloat during the current economic downturn. Our survey suggests that the stimulus has already started to ease Americans’ financial worries. The share of Americans who say that they are concerned about keeping up with living expenses amid the coronavirus outbreak has declined over the past month, from 65 percent in April to 57 percent in May.

The IBD/TIPP Financial-Related Stress Index is compiled from an online survey of 1,225 U.S. adults fielded from April 26 to April 29.

TechnoMetrica is a market research leader in the financial and automotive industries. Major industry players rely on our intelligence and insights to gain a deeper understanding of investors, affluent Americans, car buyers, and the luxury market. To discuss your custom research needs, or for permission to republish this news alert, please contact This email address is being protected from spambots. You need JavaScript enabled to view it..

 

 

 

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