Has Wall Street escaped job losses?

By Felix Salmon
May 19, 2010
Mike Mandel has the chart of the day, asking why the finance industry has lost so many fewer jobs than much of the rest of the private-sector economy:

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Mike Mandel has the chart of the day, asking why the finance industry has lost so many fewer jobs than much of the rest of the private-sector economy: financialjobs.png

I don’t agree with Mandel’s theory, which is this:

As long as the U.S. is running a big trade deficit, financial sector jobs are going to do very well. The rest of the world has to lend large amounts of money to the U.S. to keep the global economy going, and all of that money has to be funnelled through Wall Street, which creates well paid jobs.

The US twin deficit is more weighted than ever towards the public sector these days, rather than the private sector, and the number of jobs on Wall Street involved in dealing in Treasury bonds is pretty constant, and pretty small. More generally, while Wall Street does do quite a lot of debt finance, I don’t think that activity explains big headcount trends nearly as well as Mandel thinks it does.

So what’s my theory? If you look at the chart, it turns out that the job losses in finance are put into two buckets. There’s “commercial banking”, on the one hand, which has had very small job losses: people have just as many checking accounts and bank loans as they always did. And then there’s “finance and insurance”, which is what we generally think of as Wall Street, but which also includes the enormous number of employees in the insurance industry. And just like commercial banking, the insurance industry is pretty steady, and is going to have seen very few job losses indeed. What’s more, it’s probably bigger, in terms of total headcount, than the investment-banking industry.

So assume that insurance has seen even fewer job losses than commercial banking, and that it accounts for most of the jobs in “finance and insurance” — in that case, the job losses on Wall Street alone could be very large indeed to get to that final 7.3% figure.

Before reading too much into these numbers, then, I’d like to see a bit more disaggregation. It might be true that Wall Street hasn’t seen condign punishment in terms of job losses. But on the other hand, it might not.


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My goodness, what a lazy post. We don’t read you for your idle mindless chatter Felix.

The bailouts of 2008 and 2009 (which continue to exist in various forms in 2010) were a giant jobs-saving stimulus for Wall St and the rest of its padres in the FIRE complex. If you were Obama and the Congress, which jobs would you go out of the way to save first? The high-income, well educated, Type As in the FIRE world or the low-wage, barely literate, barely sentient debt-slaves? You piss off one group and you have thousands of well-written letters to the editors and lots of campaign checks for the others guys (because a laid off FIRE person on average still has a lot of net-worth over the sheetrocker who can’t find any more subdivisions to build).

Wall St took a big hit to its securitization and private equity arms, but that is mostly where the jobs were lost. But the bubble-blowing of the Fed and Treasury and Congress’s continued blowjobs to the housing industry has kept financial services very busy (those REITs doing equity offerings and all those home closings require lots of staffing of i-bankers and escrow agents).

You don’t need more disaggregation, you just need to stop being so lazy.

Posted by Sad_Oligarch | Report as abusive

Prima facie, what the chart seems to be saying is there’s been less risk of losing a job in which you push IOUs around in a big blurry circle all day than if your job involved actually doing, or trying to do, anything more practical.

For it to mean much more than this, if more to say there is, one would need to visualize fluctuation ballistics which are, as I think you’ve already pointed out, notably absent.

Posted by HBC | Report as abusive

Another reason maybe that some of the people laid off from financial services firms were given 1 year packages. That happened to two people I know. I wonder if they show up as still being on their books?

Posted by ameyer | Report as abusive