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Financial Security Index bounces back

Financial Security Index Charts » Financial Security Index Bounces Back

The September jobs report seems to have brightened the outlook of millions of Americans. Bankrate's Financial Security Index rebounded to its highest level since June. The index rose from 96.6 in September to 99.2 in October.

The timing of the monthly survey coincided with the release of the jobs report from the Bureau of Labor Statistics, which revealed a surprising reduction in the unemployment rate -- a drop from 8.1 percent to 7.8 percent. While the improvement in the jobs numbers spurred some controversy among skeptics, the American populace apparently embraced it.

"The employment report was enough to turn Americans' sentiments of job security positive compared to last month's negative reading," says Greg McBride, CFA, Bankrate's senior financial analyst.

Improvement was also seen this month in three other components of the Financial Security Index: savings, debt and overall financial situation. Net worth held steady.

But the rebound was not enough to push the index into positive territory with respect to Americans' feelings of financial security. Any number less than 100 indicates deteriorating financial security vis-a-vis 12 months ago, while any number higher than 100 denotes improvement.

Bankrate.comFinancial Security Index
Bankrate's Financial Security Index gauges how Americans feel today versus a year ago on vital financial matters. An index value of less than 100 indicates declining levels of financial security; a value greater than 100 reveals higher levels of security compared to 12 months ago.

Certain segments not so sanguine

Not surprisingly, a steady income helps fuel feelings of financial security, while income uncertainty dampens enthusiasm. Just 16 percent of retirees say their overall financial situation is better now than one year ago, the same reading as the unemployed. This represents about half the level of full-time employees at 31 percent.

About one-third of households with annual incomes of $50,000 or more report an improved overall financial situation versus one year ago. That compares to 19 percent of those earning less.

Bankrate's "wild card" question this month dealt with recent actions taken by the Federal Reserve: specifically, its recent pledge to keep interest rates low until mid-2015, coupled with a third round of stimulus, called QE3, to drive mortgage rates even lower.

So does this promise of a low-interest-rate environment for the next several years compel Americans to borrow money? The answer is a resounding "no" by 74 percent of Americans. Just 23 percent say they have a greater inclination to take out a loan as a result. Sheyna Steiner uncovers why Americans are holding back on borrowing in her story, "Consumers say 'no' to borrowing."

 

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