Finance Is No Longer Where the Jobs Are
In the spring and summer of 2007, as the first tremors of the coming financial earthquake were making themselves felt, just under 8.4 million people were working in the U.S. financial sector. This April, according to today's employment report, that number was 8.25 million.
That's not much of a decline. Viewed in the context of the decades-long boom in financial employment that preceded it, though, it does appear to represent a significant shift.
Yes, employment in finance (it's defined broadly here to include real estate, insurance and leasing businesses) has been rising again since 2011. But its share of total employment -- while rising slightly in April -- has generally been headed down.
By this measure, in fact, financial-sector employment peaked in 1987. This is somewhat at odds with the common perception that finance boomed in the 1990s and 2000s. By other measures, in fact, finance did boom: Its share of gross domestic product -- just 10.3 percent in 1947, when the data series begins -- kept rising through the 1990s to a peak of 20.5 percent in 2002. Finance's share of GDP has been more or less flat since then -- in 2015 it was 20.3 percent.
But during that time parts of the financial sector became less labor-intensive, with clerical and transactional jobs in particular replaced by automation or shipped overseas. Despite an increase in the number of bank branches, for example, the number of tellers declined from 554,550 in 1990 to 498,460 in 2015. Those job losses were offset for a while by increases in other, often higher-paying bank work, but that stopped with the financial crisis. What also stopped, at least temporarily, was a shift in employment away from traditional banking institutions that took deposits to new ones (credit card issuers, real estate lenders, etc.) that didn't. Overall, employment in what the Bureau of Labor Statistics calls credit intermediation and related activities has barely budged since 1990:
Employment in the investment business, on the other hand, has almost doubled since 1990, although most all of that growth occurred in the 1990s. The industry has also seen a dramatic shift in jobs from brokerage firms to funds, financial advisers and the like. This has continued since the financial crisis (because these are smaller jobs categories, data is only available through March).
These are the three other broad industry categories that the BLS counts as part of the financial sector.
The real estate industry (agents and brokers, property managers, landlords, etc.) has recovered from the housing bust -- it began setting new all-time employment highs early last year. Employment in insurance is setting records too. Rental and leasing has shed jobs -- you can blame Netflix for that. None of these is really what you think of when you hear the term "finance," though. Strip them out, and this is what things look like for the financial sector, narrowly defined.
Now that is not what I would call a growth sector. The financial industry has basically stopped adding jobs.
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