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You have to go all the way back to 2015 to find Americans’ financial satisfaction levels as low as they were in the second quarter of this year, no thanks to the economic damage caused by the coronavirus pandemic, the American Institute of CPAs reported last week.

The AICPA’s second-quarter personal financial satisfaction index measured 15.2, down 18.5 points from the first quarter, the biggest drop in the index’s history. The previous record was a 16.3-point decline in the 2007 fourth quarter.

The PFSi is calculated every quarter 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.

In the second quarter, the Pleasure Index dropped to 59.7 from 69.5 in the previous quarter, while the Pain Index rose to 44.5 from 36.6.

The main factor causing the quarter-over-quarter PFSi decline, and hurting overall financial satisfaction, was a 75-point increase in the Pain Index’s underemployment sub-index to 106, a record. The second-quarter level reflects data measured through the middle of June.

On Thursday, the Labor Department reported seasonally adjusted initial jobless claims of 1.434 million, up 12,000 from the previous week’s revised level.

The second largest contributor to the PFSi’s decline from the first quarter was the AICPA’s CPA Outlook Index, a sub-index of the Pleasure Index, which fell 35 points to 17. This factor captures the expectations of CPA executives in the year ahead for their companies and the U.S. economy.

It is the only index factor that is calculated from sentiment, which was captured in a survey conducted in May, the AICPA said. Its decrease was primarily driven by a steep decline in optimism about the U.S. economy’s outlook over the next 12 months.

Also notably contributing to the PFSi decline was a 25-point drop in the Pleasure Index’s job openings factor to 53, based on Bureau of Labor Statistics data through April.

Market Index Surges

Americans started the year experiencing record high levels of personal financial satisfaction. And even with the record decline in the PFSi, its current value of 15.2 is still 55.5 points higher than its all-time low of -40.3 set in the 2011 third quarter, according to the AICPA.

In the second quarter, the PFS 750 Market sub-index, an AICPA proprietary stock index that comprises the 750 largest companies trading on the U.S. market, bounced back from its depressed first-quarter reading. The Market Index rose 16.8 points 96, regaining most of the prior quarter’s lost gains. It is now just shy of its recent all-time high set in last year’s fourth quarter.

“The stock market’s recent rebound is a good reminder why it’s important to resist the urge to time the market and instead remain focused on the long-term goals of your financial plan,” Dave Stolz, chair of the AICPA’s PFS credential committee, said in a statement.

“If you had exited the stock market after its Q1 decline, you would have missed out on all of Q2’s big gains. The recent market fluctuation was a good gut check for risk tolerance and an opportunity for Americans to revisit their asset allocation.”

In an emergency move meant to make borrowing as cheap as possible and help mitigate the economic effects of the COVID-19 pandemic, the U.S. Federal Reserve cut interest rates to near-zero.

In terms of the PFSi, this caused the second-quarter inflation sub-index to drop 30 points from the previous quarter to 30, based on the Fed’s May level. Inflation is the most volatile factor contributing to the PFSi, the AICPA noted. With absolute levels so low, small changes result in large percentage changes, it said.

Essential Financial Planning

“Finding yourself unemployed or experiencing a sudden loss of income from your business warrants revisiting your financial plan immediately and updating your monthly budget,” Stolz said.

“It is essential to understand the available COVID-related government assistance such as business loans from the Paycheck Protection Program and federal unemployment benefits and incorporate them into a revised financial plan.”

In a separate survey of its members fielded in May, the AICPA found that CPA financial planners had been busy helping clients make sense of the provisions in the newly passed Coronavirus Aid, Relief and Economic Security (CARES) Act.

Ninety percent of survey participants advised clients on Paycheck Protection Program loans, and 79% advised their clients on economic impact payments, or “stimulus checks.” And half of all respondents reported that they had helped clients file for Federal Pandemic Unemployment Compensation.

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