Americans’ financial well-being reaches record high

By Samiha Khanna

Americans reached a new level of personal financial satisfaction in the third quarter of 2017, according to the AICPA Personal Financial Satisfaction index (PFSi). The PFSi measured 25.9, continuing an upward trend in place since January 2017, and surpassing all previous measures in the 24-year history of the index. The increase was driven by market gains, new job openings, and growing real estate values.

The PFSi weighs the impacts of positive economic influences—or personal financial pleasure—on the average American against negative factors—dubbed personal financial pain. Positive factors the PFSi measures include job openings, home equity, the CPA Outlook Index (a measure of CPA executives’ sentiment toward the economy), and a proprietary stock index called the PFS 750 Market Index. Negative factors include underemployment, loan delinquencies, personal taxes, and inflation.

Personal Financial Pleasure Index

The Personal Financial Pleasure Index, one component of the PFSi, measured 68.1 points this quarter, up 2.1 points this quarter and up 6.1 points from this time last year.

Job openings grew more than 3% from both the previous quarter and the previous year, with most expansion occurring in food services, professional and business services, and health care. More than a third of new job openings were in the South.

Better job opportunities are positive signs and ideally will drive Americans to stay competitive in the job market and bolster their financial safety net, said Leonard Wright, CPA/PFS, a member of the AICPA Personal Financial Specialist Credential Committee.

“Consumers should take to heart that the economy is trending toward further improvement,” Wright said. “However, be aware that as a result of a better economy, technology will evolve more rapidly due to investments. As a result, we all have a duty to ourselves to be on a continuing learning path to remain relevant in a changing workforce.”

Gains in the PFS 750 Market Index contributed prominently to Americans’ increasing financial pleasure in the third quarter, climbing 10.2% over the previous year. The banking sector saw the strongest gains (44%), followed by the aerospace and defense sector (42%). Home equity rose 7.9% from the previous quarter, with annual growth outpacing that of outstanding mortgages according to the most recent data available (April 2017).

Optimism about the U.S. economy is also growing, according to the CPA Outlook Index, for which CEOs, CFOs, controllers, and other CPA executives were surveyed in August. Their overall outlook was up 3.6% from the previous quarter and 16.3% from the same time last year.

Personal Financial Pain Index

This quarter the Personal Financial Pain Index, the second component of the PFSi, measured 42.1, down 0.5 points from last quarter and down 1.3 points from this time last year.

The decline in the Pain Index was driven largely by a drop in loan delinquencies, which fell 6.7% from the previous quarter and 20.3% from the previous year. However, loan delinquencies, which include mortgages, could climb in the future due to the effects of hurricanes Harvey, Irma, and Maria and the California wildfires.

Families focused on rebuilding should consult the Disasters and Financial Planning guide, a joint publication of the AICPA, the National Endowment for Financial Education, and the American Red Cross, Wright said.

Underemployment and personal taxes also crept up from the previous quarter, though taxes still remain below their all-time high in the late 1990s and early 2000s. The AICPA’s blended inflation measure was 1.4% for the third quarter, a slight decrease from the previous quarter’s measure of 1.5%, but still well below the 2% target for inflation set by the Federal Reserve.

Samiha Khanna is a freelance writer based in Durham, N.C. To comment on this article, email editorial director Ken Tysiac.

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