Even in the face of the U.S. stock market having its worst quarter in four years, Americans continued to enjoy increased personal financial satisfaction in the third quarter. Substantially fewer loan delinquencies – almost 25 percent below the prior year’s level – and a nearly-decade low level of underemployment have all eased Americans financial pain in the last quarter. That’s according to the results of the 2015 third quarter PFSi (Personal Financial Satisfaction Index) released recently by the American Institute of CPAs (AICPA).
The PFSi measured 16.2 in the third quarter of 2015, representing a 1.3 point increase from the prior quarter and a 16.3 point increase from one year ago. Loan delinquencies on mortgages and other loans were 23.8 percent below third quarter 2014 and 7.2 percent lower than this year’s second quarter. As a comparison, the mortgage delinquency rate for the third quarter of this year was only 5.77 percent – compared to nearly double that number – 11.28 percent- in the spring of 2010.
Adding to this positive financial outlook was an underemployment rate at a nine-year low, or 15.8 percent below the same time frame in 2014. The third-quarter Personal Financial Pleasure Index, a component of the overall PFSi, held the previous quarter’s level due to a 5-point increase in job openings and 2-point increase in home equity nationwide. However, tempering the employment situation was an alarming labor participation rate coming in at a 38-year low. One factor influencing this was discouraged workers with skill gaps who have stopped looking for work.
“Underemployment continues to be an issue having an impact on middle class families during this economic recovery,” said Jimmy J. Williams, CPA/PFS, member of AICPA’s National Accreditation Commission. “Many individuals have training, experience and certifications in fields that are in contraction or reducing their labor force. One prominent example is the oil and gas industry, where many skilled engineers are currently taking less pay in a ‘something is better than nothing’ approach to maintaining their family’s cash flow during this period of contraction.”
Inflation was 78.4 percent lower than the 2014 third-quarter level. Crude oil which has remained under $50/barrel, has been a strong contributing factor to the decrease in inflation.
The PFS 750 Market Index reached an all-time high in the fourth quarter of 2014, and maintained that level in the first quarter of this year. Its current value is 12.1 percent below that high, and the third quarter of 2015 was the worst for the market in four years. This was the first 10 percent correction since 2011, and more than half of the S&P 500 lost 20 percent or more. The poorest performing industries were broadcasting and media, both down nearly 80 percent. The top performers were Internet stocks, up 120 percent, and technology stocks, up 68 percent.
The PFSi weighs a variety of economic factors to determine the financial standing of a typical American. It is the result of calculating the difference between the Personal Financial Pleasure Index and the Personal Financial Pain Index. The PFSi, calculated as the Personal Financial Pleasure Index minus the Personal Financial Pain Index represents the financial standing of a typical American, uses both proprietary and normalized official U.S. Government data.
Pleasure factors include the proprietary PFS 750 Market Index, comprised of the 750 largest companies by market capitalization trading on the U.S. markets, excluding ADRs, mutual funds and ETFs. The other components are the AICPA’s CPA Outlook Index, Real Home Equity Per Capita and Job Openings Per Capita. Pain factors include inflation, personal taxes, loan delinquencies and underemployment.
For more information, visit www.aicpa.org/PFSi.