Financial Stress Slightly Up In May

Financial Stress Slightly Up In May

The TIPP Financial Stress Index edged up by 0.9 points in May. The index is below its three-month moving average for the sixth month in a row, indicating its commitment to improvement.

Raghavan Mayur
Raghavan Mayur

Following a 4.9-point improvement in April, the TIPP Financial Stress Index edged up by 0.9 points in May.  Nonetheless, the index is below its three-month moving average for the sixth month in a row, indicating that it is committed to improving.

Relevance

The TIPP Financial Stress Index is an accurate indicator of Americans' financial stress related to paying bills and making ends meet.

Two-thirds of the economy is driven by consumer spending.  When people are stressed, they are hesitant to spend money.  The index also tracks job-related tensions, which rise when the labor market is tough.

By The Numbers

The TIPP Financial Stress Index is a one-of-a-kind metric for evaluating financial stress.  In December 2007, we began using it to track financial stress.

We compute the index from responses to the question: thinking of your personal finances, compared to the past three months, do you feel more stressed these days, less stressed these days, or feel the same level of stress?

The index ranges from 0 to 100; the higher the number more the stress, a reading of 50.0 is the neutral point.

The TIPP Financial Stress Index rose 0.9 points to 57.7 in May, following a 4.9-point drop in April.  The index is below its three-month moving average for the sixth month in a row.

The index is also below its three-month moving average for the sixth month in a row, a welcome sign of strength.

Overall the stress index in May at 57.7 is

  • 1.6% higher than the April reading of 56.8
  • 1.5% lower than the index's historical average of 58.6
  • 17.3% lower than the Pandemic high of 69.8 posted in April 2020
  • 12.5% higher than the Pre-Pandemic level of 51.3 posted in March 2020
Red shaded groups show higher stress compared to their historical average.

Under The Hood

This month 12 of 36 groups we track improved on the index and achieved less stress.  24 of the 36 groups increased.

Despite the improvement, 35 of the 36 demographic groups TIPP tracks scored above 50, indicating broad-based stress.

Here are the ten demographic groups with the highest stress levels based on a three-month simple moving average.  Some of the financial stress is driven by politics. Conservatives and Republicans are concerned about the new administration's policies.

The chart below shows the ten demographic groups with the least stress.  The least stressed groups are Blacks, liberals, and the 65+ age group.

What Are The Stressors?

  • Many Americans experience stress as a result of having to pay bills and rent. 53% are concerned about meeting living expenses like car payments or rent. Twenty-seven percent are very concerned, while another twenty-six percent are somewhat concerned.
  • Many Americans had to dip into their retirement savings to make ends meet due to furloughs or layoffs. Fifty-two percent are concerned that the Pandemic will jeopardize their retirement savings.
  • Half of all households are job sensitive. 41 percent have at least one member looking for full-time work, and 30 percent are concerned that they will lose their job in the next twelve months.
  • Finally, in May, taxes are due.

The Cure

Jobs are the solution to the problem.  The new economy will create new jobs. Planes will take to the skies, cruise ships will sail, deserted cities will come alive with activity, restaurants will open doors, schools and colleges will reopen, and new jobs will be created.  Anxiety about money will fade once it begins to flow.  We will be able to put the Pandemic's dark days behind us and look forward to a roaring economy.


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