The Average US Consumer Has Been Under Stress for 10 Quarters

I found the following at nakedcapitalism.com while reading an article a friend of mine sent me. The index is interesting because it shows some of the stresses in the US economy at the consumer level. The article indicates that in spite of all the rosy talk in the media about a recovery there are still parts of the economy that are really struggling. From CredAbility:

CredAbility, one of the leading nonprofit credit counseling and education agencies in the United States, today released the CredAbility Consumer Distress Index results for the 2010 fourth quarter. The Index, a quarterly measure that tracks the financial condition of the average US household, found that rising stock prices helped propel growth in consumers’ net worth. But lower scores in three of the index’s other four categories -- employment, housing and household budget – drove down the overall index. The health of household budgets declined each quarter in 2010 and is at the lowest level since the first quarter of 2009.

For the quarter ended December 31, 2010, American households scored a 64.3 on the Index’s 100-point scale, down slightly from 64.4 in the third quarter of 2010. For all of 2010, the index showed a small improvement, moving up from a score of 63.9 in 2009’s fourth quarter.

A score below 70 indicates a state of financial distress. The average US consumer has been in financial distress for 10 consecutive quarters, according to the Index. The last time the index was above 70 was in the second quarter of 2008.

According to the index, the 10 states ranked as the most financially distressed account for nearly 33 percent of the nation’s Gross Domestic Product. These states include California and Nevada in the West; Michigan and Indiana in the Midwest and Florida, Georgia, Alabama, North Carolina, South Carolina and Mississippi in the Southeast.

While US Gross Domestic Product (GDP) increased 3.2 percent in 2010’s fourth quarter, the CredAbility Consumer Distress Index indicates that the increased economic activity has not yet helped many Americans.

“The increase in the GDP in the fourth quarter and 2010 has not yet translated into improved financial health for many average American families,” said Mark Cole, CredAbility’s chief operating officer and the executive responsible for the CredAbility Consumer Distress Index.

“Improved stock prices have increased the value of 401(k) and other investment accounts in the average US household, but high unemployment continues to stifle income growth, causing many homeowners to miss mortgage payments,” Cole said. “While an increase in consumer spending helped the economy in the fourth quarter, the index showed that an increasing number of people failed to prudently manage their household budgets. This lack of savings could cause financial problems if they need to rely on their savings in the future.”

Based on the index’s data, Cole said that a tale of two different American families is developing in America. “The family with one or two stable jobs is seeing their investments grow again and is beginning to spend more of their household income,” he said. “But families that have lost a job or seen other income sources reduced, and who don’t have enough income to invest, have experienced increased financial distress.

“Unfortunately, millions of families are in the second category. In 2010, approximately 14.8 million people ended the year unemployed, more than 1 million families lost homes to foreclosure and 43.6 million Americans used food stamps to buy groceries.”

For the second straight quarter, Michigan posted the worst score on the Index with a 58.83. To see a detailed explanation of how the Index works and a national map, go to www.CredAbility.org/ConsumerDistressIndex. A link to the Index will also be posted on the CredAbility Twitter account, which can be found at http://twitter.com/CredAbility.

Other highlights from the fourth quarter index include:

• Seven states, led by North Dakota (79.35) and South Dakota (76.94), scored above the distress threshold of 70 points. Others were Nebraska (74.84), Wyoming (74.09), New Hampshire (72.3), Vermont (71.3) and Iowa (70.05).
• Seven more states and the District of Columbia are within two points of moving out of financial distress. These states are Massachusetts, Minnesota, Montana, Virginia, Utah, Connecticut and Colorado.
• Among the most distressed states, Nevada moved from No. 6 to No. 3 and Florida moved from No. 7 to No. 5. For the first time in 2010, North Carolina moved into the top 10 most distressed states at No. 9.
• Some states’ level of distress improved during the past quarter. Indiana, which had ranked as the No. 5 most distressed, is now No. 7. Ohio, which had ranked No. 8, is now No. 11.

Fourth quarter Index data by state:

	Q4 2010	Q3 2010	Q2 2010	Q1 2010	Q4 2009
National	64.32%	64.40%	65.23%	65.04%	63.96%
States
Michigan	58.83%	58.11%	61.01%	60.69%	60.47%
Mississippi	59.24%	58.76%	60.62%	60.57%	60.69%
Nevada	59.27%	60.71%	59.23%	59.16%	59.56%
Alabama	60.03%	60.23%	61.89%	61.60%	61.46%
Florida	60.21%	60.81%	61.01%	60.70%	60.48%
South Carolina	60.56%	60.10%	61.29%	60.63%	60.09%
Indiana	61.16%	60.68%	62.61%	62.27%	61.74%
Georgia	61.26%	61.24%	61.37%	61.24%	61.13%
North Carolina	61.38%	61.66%	62.28%	62.11%	61.53%
California	61.39%	61.31%	61.71%	61.36%	61.29%
Ohio	61.41%	60.83%	63.06%	62.60%	62.18%
Tennessee	61.53%	61.54%	62.26%	61.72%	60.97%
Kentucky	61.63%	61.72%	63.38%	62.83%	62.03%
Rhode Island	62.29%	62.57%	63.70%	63.33%	63.20%
Missouri	62.78%	62.43%	64.62%	64.37%	63.97%
West Virginia	63.76%	63.22%	64.50%	64.11%	63.39%
Arkansas	63.79%	63.94%	65.73%	65.24%	64.54%
Illinois	63.79%	63.01%	64.66%	64.45%	64.43%
Arizona	63.81%	63.98%	62.05%	61.75%	61.62%
Louisiana	64.00%	65.07%	67.64%	68.13%	68.59%
New Mexico	64.74%	65.35%	65.72%	65.64%	65.42%
Maine	64.80%	64.29%	66.04%	65.78%	65.46%
Washington	64.99%	64.88%	65.60%	65.59%	65.71%
Pennsylvania	65.07%	65.23%	66.99%	66.92%	66.61%
Delaware	65.23%	65.53%	66.96%	66.34%	66.00%
Hawaii	65.40%	65.51%	68.65%	67.96%	67.84%
Oregon	66.04%	65.88%	64.66%	64.29%	63.72%
Texas	66.07%	66.48%	65.89%	65.82%	65.36%
New York	66.25%	66.61%	67.79%	67.45%	67.35%
New Jersey	66.47%	66.44%	67.67%	67.42%	67.40%
Idaho	66.54%	67.28%	65.11%	64.51%	64.48%
Wisconsin	66.91%	66.27%	68.05%	67.48%	66.59%
Maryland	67.33%	67.58%	68.94%	68.94%	68.89%
Kansas	67.77%	68.41%	70.26%	69.79%	69.29%
Alaska	67.82%	67.31%	70.70%	70.68%	70.70%
Oklahoma	67.98%	66.88%	68.63%	69.02%	69.10%
Colorado	68.16%	68.23%	68.34%	68.31%	68.15%
Connecticut	68.29%	68.20%	69.23%	69.04%	68.96%
Utah	68.38%	68.58%	67.65%	67.79%	68.15%
Virginia	68.41%	68.50%	69.30%	69.16%	69.21%
Montana	69.20%	69.28%	69.51%	69.99%	69.75%
District of Columbia	69.31%	68.55%	64.64%	66.07%	65.72%
Minnesota	69.38%	69.30%	69.75%	69.01%	68.14%
Massachusetts	69.58%	68.96%	68.37%	68.18%	68.08%
Iowa	70.05%	69.91%	71.40%	70.97%	69.98%
Vermont	71.32%	70.88%	72.05%	71.63%	71.07%
New Hampshire	73.30%	72.77%	70.64%	69.26%	69.07%
Wyoming	74.09%	72.54%	72.80%	72.83%	72.76%
Nebraska	74.84%	74.87%	76.09%	75.47%	74.20%
South Dakota	76.94%	76.19%	77.43%	77.21%	75.62%
North Dakota	79.35%	79.45%	78.95%	78.89%	79.25%