Back-to-school season is well underway, bringing with it the need for supplies, new clothes, books, and more. According to a National Retail Federation survey, back-to-school outlays for the coming academic year will amount to $39 billion, or $875 per household for the K-12 set, while the college-bound will spend an even larger $87 billion in aggregate, or $1,365 per household.

For many American households this comes as another strain to their already fragile finances. Although inflation is moving lower, the general price level continues to rise—just not as quickly as over the last few years. To be sure, prices for some items on back-to-school lists have cooled off. Apparel prices were up a scant 0.2 percent in July compared to a year ago, according to the Bureau of Labor Statistics, while textbook prices actually fell 2.8 percent in the last year. On the other hand, internet access, increasingly an educational must-have, costs 3.9 percent more than a year ago. That new pair of eyeglasses and haircut for the first day of kindergarten? Up 4.3 percent and 4.5 percent, respectively. And that’s not even to mention the weight of accumulated increases in already expensive necessities like housing and childcare that are devouring household budgets as this recent Wall Street Journal article describes.

Moreover, the battle to bring inflation under control has not been without collateral damage. For example, the labor market that was humming early in the aftermath of the pandemic, leading to increased opportunities and wages, including among low-income groups, is rapidly softening. That is weighing on job openings, hiring, income growth—and confidence. According to the Federal Reserve Bank of New York’s July 2024 SCE Labor Market Survey, respondents reported the highest expected likelihood of becoming unemployed in the 10-year history of the survey. The survey also found that the average expected wage offer from a prospective new job was lower than at the same time last year in July.

At the same time, high interest rates, tight lending standards, and an adverse regulatory environment are limiting consumers’ access to the credit they need to cover those back-to-school or day-to-day expenses. The June 2024 SCE Credit Access Survey, also conducted by the New York Fed, found that application rates for consumer credit fell between February and June, while rejection rates for those submitting applications increased markedly over the same time period.

This is concerning news for consumers who want to use credit as a tool to manage their budgets at a time of financial stress, as well as for an economy on the cusp of a cyclical inflection point. Look for more insights into the consumer credit environment from the lenders’ perspective in AFSA’s Consumer Credit Conditions Index (C3 Index). The next installment of the C3 Index, which draws on a survey of member finance companies, will be released soon.