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 FOCUS on economics


measured -29.6. Tis negative reading indicates the average American was feeling very dissatisfied with their financial health. Te two-labor market related factors, job openings per capita and underemployment, are in close contention for having the next biggest impact on improving the overall PFSi. Underemployment started the decade at an all-time high and now, exactly 10 years later, is at an all-time low. A look at the underlying Bureau of Labor Statistics data shows just how substantial of a difference 10 years has made—job openings went from 2.4 million to 7.4 million (204% increase). Despite the PFS 750 Market index experiencing the longest bull market in history, helping it go from a total value of $13 trillion to $34 trillion (162% increase), it had only the fourth biggest impact on improving the average American’s financial well-being.


“It is encouraging to see such a


relatively high number of Americans making loan payments on time, all while building up equity in their homes,” said Michael Landsberg, CPA, PFS, member of the AICPA Personal Financial Planning Executive Committee. “However, it’s important to keep in mind the lessons from the Great Recession. Tis is the perfect time to review all your debt obligations and make sure you’re not overextended. By taking time to strengthen your financial house now, while economic conditions are favorable, you will be in a better position to ride out the next recession.” Te only factor that did not improve the


overall PFSi this past decade is pain from personal taxes. Tis Pain index factor went up and is nearly double what it was when the 2010s started. It is worth noting at the beginning of the 2010s, taxes were low on


a temporary basis as part of an economic stimulus package. Two years into the 2010s, the PFSi hit its all-time low of -40.4 in Q3 2011. Since then, the index steadily gained about 3 points per quarter until Q4 2015. In that period, the biggest contribution to its gain was a reduction in loan delinquencies, followed by a reduction in inflation. Between Q4 2015 and Q1 2017, the PFSi stayed relatively flat. Since Q1 2017, it has gained about 2.2 points per quarter, taking account of three quarters with modest weakening. Tree factors are in close contention for leading this improvement: gains in the PFS 750 Market index, increases in job openings and reductions in loan delinquencies. Te next most important factor has been reduction in inflation.


IF YOU WANT THE WORLD TO SEE YOU DIFFERENTLY, GET A DIFFERENT KIND OF CREDENTIAL.


Earning the AICPA Personal Financial Specialist (PFS ) credential says TM


you’re different. It says you’re required to adhere to a higher ethical standard. It says you are an impartial adviser who puts your clients’ STAND OUT.


Be different. Be a PFS credential holder. Start at aicpa.org/PFS. TAX I RETIREMENT I ESTATE I RISK MANAGEMENT I INVESTMENTS


38


CPAFOCUS


2020 Path Finders & Trailblazers


© 2016 American Institute of CPAs. All rights reserved. 21092-326


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