Americans’ personal financial satisfaction jumped to an all-time high in the third quarter on the strength of the job market and continued stock market growth, the American Institute of CPAs reported Thursday.

The new high was the fifth consecutive quarter AICPA’s personal financial satisfaction index set a record.

The PFSi is calculated as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, with positive readings indicating that Americans are feeling more financial pleasure than pain.

The third quarter PFSi measured 32, a 3.1-point increase from the July-to-September period, its biggest quarterly increase since the second quarter of 2017. The increase owed to a two-point quarter-over-quarter gain in the pleasure index, which was boosted by a slight drop in the pain index.

Pleasure Index

The AICPA reported that the pleasure index, which comprises four equally weighted factors, was up two points from the second quarter to 73.9, setting an all-time record for the seventh quarter in a row. Its biggest contributor, the PFS 750 Market Index, now accounts for 31.5% of its total value. This proprietary stock index includes the 750 largest companies trading on the U.S. market, adjusted for inflation and per capita.

The PFS 750 Market Index reached 93 in the third quarter, 5.3 points above its second quarter level. Its value was determined by the stock market’s closing position at the end of the first trading day of fourth quarter, Oct. 1. Since then, the market has pulled back, and if it does not rebound, the resulting drawdown will be captured in the fourth-quarter index.

“While it is great that the stock market’s record performance is bolstering Americans’ financial satisfaction, it’s crucial for investors to keep in mind that pullbacks, like the one we’ve seen recently, are a regular occurrence for risk assets,” Robert Westley, a member of the AICPA’s personal financial specialist credential committee, said in a statement.

“Short-term volatility and pullbacks are the price we pay for riskier assets that provide a higher return over the long term. Worried investors should build confidence with a strong financial plan that includes a diversified portfolio designed to navigate market volatility and meet their personal financial goals.”

The Job Openings Per Capita Index, the pleasure index’s second largest contributor, increased 1.1 points over the previous quarter as job openings set a record in August. With 7.1 million job openings for 6.2 million job seekers, the tight labor market saw 3.6 million workers voluntarily leave their jobs in August, the fastest pace in 17 years, according to the Bureau of Labor Statistics.

The other two components of the pleasure index also rose. The AICPA Economic Outlook Index, which captures CPA executives’ expectations in the year ahead for their companies and the U.S. economy, was 3.5% higher than the prior year level and flat vis-à-vis the previous quarter.

The Real Home Equity Per Capita index, based on data issued for April, was 6.5% above the prior year value and 2.1% ahead of the previous quarter level. However, it is still 11.6% below its 2006 record high.

Pain Index

At 41.9, the pain index saw three of its four equally weighted factors decrease from the July-to-September quarter, led by a 2.7-point drop in loan delinquencies, the improvement more heavily weighted toward mortgages. The AICPA noted that the current reading of delinquencies on mortgages, 3.3%, is still above the typical 2.1% level recorded between 1994 and 2003, though well below the peak delinquency rate for mortgages 11.3% set in the spring of 2010.

However, loan delinquencies could increase in future quarters, the AICPA said, because Hurricanes Florence and Michael and wildfires across the U.S. left significant damage and affected a large area. Similar natural disasters in the past ultimately led to significant increases in delinquencies in the areas they damaged.

For the time being, it said, Fannie Mae, Freddie Mac and the Federal Housing Authority have all announced temporary suspensions on any actions as a result of mortgages going unpaid in areas recently devastated by hurricanes and wildfires.

The third-quarter Inflation Index was down 1.5% from the second quarter level at 53, but up 43.7% from the year-ago level. The index relied on the Federal Reserve’s August level. The Fed’s September announcement about planned rate rises will be reflected in future quarters, the AICPA said.

It said inflation is the most volatile factor contributing to the PFSi, and with absolute levels so low, small changes result in large percentage gains. The PFSi blended inflation measure for the third quarter was 2.2%, versus 1.5% a year ago and 2.3% last quarter. (The Fed’s target for inflation is about 2%.)

“Inflation is forecasted to pick up by the end of the year,” Mark Astrinos, a member of the AICPA’s personal financial specialist credential committee, said in the statement. “It’s important to understand that while this translates to higher prices of goods and services for individuals, the magnitude of the change can be mitigated with proper planning.”

The Underemployment component of the pain index, at 33, was down 1.1 points from the second quarter and 6.4 points from the prior year level. In comparison, its peak value was 84.3 in the fourth quarter of 2009. It is now 12.6% below its average value in the two years before the recession.

The Personal Taxes Index, the fourth factor in the pain index, decreased 4.7 points from a year ago and was approximately flat with the prior quarter level.

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