Americans’ finances rebounding in the economic recovery, AICPA PFS Index finds

By Courtney Vien

A decrease in loan delinquencies, coupled with an increase in job openings, has boosted Americans’ satisfaction with their finances, a new AICPA economic index finds.

The Personal Financial Satisfaction Index (PFSi), results of which were released for the first time today, stands at +6.6, its highest level since 2007. The PFSi has risen 6.5 points since last quarter and 14.9 points over last year, indicating that the economic recovery is improving the finances of the average American. While the index results were released publicly for the first time today, the AICPA calculated the PFSi retroactively to provide perspective.

“After years of feeling personal financial pain, the continued growth of the stock market, increases in available jobs, and a sharp decrease in consumer loan delinquencies are moving Americans’ finances into positive territory,” Jeannette Koger, AICPA vice president–Member Specialization & Credentialing, said in a news release. Koger also observed that the PFSi can help spark conversations between financial planners and their clients.

The PFSi, which is calculated using both proprietary and official U.S. government data, is designed to   gauge the financial standing of the average American. A positive PFSi reading suggests that Americans’ assets and opportunities for financial growth have increased, while a negative reading suggests the opposite.

The PFSi is calculated by measuring the difference between two equally weighted indexes, the Personal Financial Pleasure index and the Personal Financial Pain index. The Personal Financial Pleasure index evaluates four factors associated with positive financial growth, including real home equity per capita and job openings per capita. It also incorporates:

  • The findings of the PFS 750 Market Index, a stock index based on the performance of the 750 largest companies trading on U.S. markets, excluding American depositary receipts, mutual funds, and exchange-traded funds.
  • The AICPA Outlook Index, a measure of CPAs’ and C-suite executives’ expectations of their companies’ economic activity.

The Personal Financial Pain index weighs four factors associated with negative financial performance: loan delinquencies, underemployment, inflation, and personal taxes.

A decrease in loan delinquencies from 3.8% to 2.9%, including delinquencies on credit card and mortgage loans, was most responsible for this quarter’s improved PFSi score. The second most important factor raising the score was the increase in job openings from 4.0 million to 4.8 million, followed by improvements in the stock market reflected in the PFS 750 Market Index.

The PFSi also received a boost from reduced underemployment and increased real home equity per capita.

This quarter, the Personal Financial Pleasure index rose to 59.9, a 6% increase from last quarter and a 17% increase from last year. The Personal Financial Pain index dropped to 53.3, 6% lower than last quarter and 10% lower than last year.

Courtney Vien is a JofA associate editor.

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