Americans’ financial picture holds steady this quarter

Americans’ financial outlook remained fairly positive early this year, despite a slight dip in the AICPA’s Personal Financial Satisfaction Index (PFSi). The PFSi dropped to 13.0 in the first quarter of 2016, down 2.1 points from the previous quarter and 0.3 points from the first quarter of last year. An 11.6% decline in the AICPA CPA Outlook Index (CPAOI)—a measure of CPA executives’ views on the economy and their companies’ economic well-being—from the previous quarter was largely responsible for the drop in the PFSi.

The PFSi is a proprietary index that gauges the financial standing of the average American. It is calculated as the difference between two subindexes: the Personal Financial Pleasure Index and the Personal Financial Pain Index. Four equally weighted factors are measured in the Pleasure Index: the CPAOI, real home equity per capita, job openings per capita, and the PFS 750 Market Index, a propriety measure of the stock market calculated quarterly by the AICPA. The Pain Index is also comprised of four equally weighted factors: inflation, underemployment, loan delinquencies, and personal taxes.

In the first quarter of this year, the Pleasure Index fell by a scant 0.4 points (0.7%), while the Pain Index rose by 1.7 points (3.9%). The Pleasure Index dropped 1.5 points (2.5%) from Q1 of 2015.

“Despite a slight dip in the PFSi … generally speaking, the economic picture was fairly positive. Housing prices are up, unemployment is down, and the stock market has been doing very well since mid-February,” Michael Eisenberg, CPA/PFS, a member of the AICPA’s National CPA Financial Literacy Commission, said in a news release.

The 11.6% drop in the CPAOI was a key factor in the slight dip in the Pleasure Index. The CPAOI was down 20.4% from the first quarter of last year.

The PFS 750 Market Index was down 8.3% from the first quarter of 2015. Though stock prices fell in late 2015 through early 2016, they have rebounded to a certain extent. Telecommunications and utilities stocks saw the largest gains in the quarter, while health care and financial stocks have slid.

Real home equity per capita rose, however. Median home values in some parts of the South, Midwest, and Northeast have climbed above what they were during the housing bubble. Since 2012, about 10 million homeowners have emerged from negative equity.

Loan delinquencies dropped 5.6% in Q1 and have fallen 22.7% since the first quarter of last year.

The jobs outlook is likewise positive. Job openings have remained at historic highs, with the wholesale trade and construction industries showing the greatest growth in Q1. Underemployment reached a nine-year low: It was 2.3% lower than the previous quarter and 13.3% lower than it was in the first quarter of 2015. In addition, the labor participation rate has finally begun to climb. This may lead to a tightening of the job market and ultimately continue to drive the underemployment rate down.

—Courtney L. Vien (cvien@aicpa.org) is an associate editor for the AICPA.