LegalShield Law Index, a suite of leading indicators of the economic and financial status of U.S. households and small businesses, points to strong consumer financial health due to a combination of rising incomes, manageable debt levels, and an increasingly tight labor market. The LegalShield Consumer Financial Stress Index, one component of the broader LegalShield Law Index, remains historically healthy, while the Bankruptcy Index improved 3.9 points to 46.0 in the third quarter, reflecting the solid financial health experienced by most consumers.
“Without question, consumers are feeling good about the economy and their finances right now,” explained Dave Coffey, LegalShield’s Senior Vice President and Chief Digital Officer. “For the last two years, the LegalShield Law Index has pointed toward this robust economy, and we continue to have a bullish outlook for consumers. Low consumer financial stress should translate into solid retail spending, and we suspect that will drive hiring rates and wages higher to keep up with demand.”
LegalShield is less optimistic about the housing market. The LegalShield Real Estate Index suggests existing home sales are unlikely to improve in the short term due to severe inventory shortages and rising prices, while the LegalShield Housing Activity Index suggests that housing construction momentum has stalled in 2018. Residential construction continues to face numerous headwinds, including labor supply shortages; rising labor costs; and (most notably) rising prices for lumber, steel, and aluminum, where tariffs continue to put upward pressure on prices.
“Although the housing market varies from region to region, overall we’re not seeing a big rebound occurring any time soon,” said Coffey. “The Federal Reserve is on track to raise rates for the fourth time this year in December, which will put even more upward pressure on mortgage rates and make home buying even less affordable. Normally we’d expect to see home builders respond by ramping up construction, but it just hasn’t materialized.”
The LegalShield Law Index reflects the demand for legal services among the company’s provider law firms in all 50 states. The Law Index is a suite of leading indicators of the economic and financial status of U.S. households and small businesses, and it also includes the LegalShield Foreclosure Index in addition to the Consumer Financial Stress Index, Housing Activity Index, Real Estate Index, and the Bankruptcy Index.
The LegalShield Consumer Financial Stress Index worsened 1.0 point in the third quarter to 74.9 but remains historically low. Meanwhile, the Conference Board’s Consumer Confidence Index rose 3.7 points from 134.7 in August to 138.4 in September, an 18-year high. Other measures of consumer sentiment, including the University of Michigan’s Consumer Sentiment Index, are also at or near record highs, as would be expected given the health of the U.S. labor market. “The combination of sub-4 percent unemployment and a lower tax burden for most consumers should keep confidence high for at least the remainder of the year,” added Coffey.
The LegalShield Bankruptcy Index, a leading indicator of quarterly bankruptcy filings, continues to suggest that bankruptcies will remain subdued in the near term, However, there have been some signs that lenders are pulling back in credit markets. For example, in the most recent Federal Reserve Senior Loan Officer Survey, a net 12 percent of banks reported tightening standards for credit card issuance, the highest rate since the Great Recession. Similarly, the 90+ day auto-loan delinquency rate among subprime borrowers was 16.3 percent in the second quarter of 2018 (up from 12.4 percent in 2015).
“Our data lead us to point out three overall takeaways: 1) investors and shoppers alike should expect a strong holiday shopping season, maybe with fewer bargains than in past years both in terms of retail-based equities and consumer goods; 2) this will be a good year for seasonal retail workers, as labor is in short supply and demand is strong; and 3) given consumer demand, small businesses should be looking for opportunities to expand and take advantage of the strong economic conditions. The outlook for Main Street hasn’t looked this good since before the recession,” Coffey said.
The five LegalShield indices closely track a handful of key economic indicators, such as the Consumer Confidence Index (developed by the Conference Board), Housing Starts (reported by the U.S. Census Bureau), and Foreclosure Starts (reported by the Mortgage Bankers Association). Each LegalShield index has undergone a battery of statistical tests to validate its relationship to an existing economic indicator that sheds light on the health and direction of the U.S. economy. LegalShield publishes the Law Index quarterly, on the sixth business day of each quarter. Please contact Jacob Freedman at firstname.lastname@example.org for a copy of the economic assessment.
A pioneer in the democratization of affordable access to legal protection, LegalShield is North America’s leading provider of legal safeguards and one of the leading providers of identity theft protection, for individuals, families and small businesses. The 46-year-old company has more than 1.75 million members that are covered by its legal and identity theft plans. IDShield provides identity theft protection to one million individuals. LegalShield and IDShield serve more than 141,000 businesses. Both legal and identity theft plans start for less than $25 per month.
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