Productive place.

Photographer: Andrew Harrer/Bloomberg

How the Fed Does More With Less

Mark Whitehouse writes editorials on global economics and finance for Bloomberg View. He covered economics for the Wall Street Journal and served as deputy bureau chief in London. He was previously the founding managing editor of Vedomosti, a Russian-language business daily.
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For all the fretting about how U.S. productivity isn’t growing as quickly as it should, there's at least one place where it appears to be doing pretty well: the Federal Reserve.

The Fed plays a much bigger role in the economy and financial system than it did a decade ago, yet it manages to do so with fewer employees. Indeed, employment at the central bank has been declining since the 1990s -- both in nominal terms and in relation to the financial institutions it serves and oversees.

As of July 2016, the Fed had about 0.7 staff for each 100 people employed in the credit intermediation sector (which includes banks and other consumer lenders), according to the Bureau of Labor Statistics. This ratio is lower than it was in 2007, before a severe financial crisis led to a dramatic expansion of the Fed's responsibilities. Here's how that looks:

Fed Employees Per 100 Bankers
Source: Bureau of Labor Statistics

So is the Fed really doing that much more with less? Yes and no. A lot of the change in employment has to do with a thing that many millennials wouldn't even recognize: the paper check. As recently as the early 2000s, a large share of Fed staff -- literally thousands of people -- were engaged in collecting and processing all the checks that people and companies used to pay for everything from groceries to labor.

Thanks to the internet and electronic payments, the Fed can now process more payments with fewer people. As of 2012 (the latest data available), the regional Federal Reserve banks had just 840 employees providing fee-based services to financial institutions (including checks and other payment and settlement services), down from more than 5,400 in 2001. With fewer physical checks to handle, those people can move a lot more money: The daily value processed per employee stood at about $4.4 billion in 2012, up from less than a half-billion in 2001.

Meanwhile, employment in other departments has risen in response to the 2008 financial crisis and the Dodd-Frank Act of 2010, which gives the Fed such responsibilities as stress-testing banks and overseeing all systemically important financial institutions. The numbers, though, aren’t large enough to offset the decline in payment processing. As of 2012, the Federal Reserve Board and regional banks employed 4,108 people in their supervision and regulation departments, up from 2,915 in 2006.

Surely, there's more the Fed can do to boost the benefit it provides per employee. Sensible capital regulation, for example, could make the system more resilient while reducing the need for supervisors to micromanage banks. Still, it's instructive to recognize that when it comes to staffing, the demise of paper checks matters more than Dodd-Frank. At the very least, it helps put things in perspective.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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Mark Whitehouse at

To contact the editor responsible for this story:
James Greiff at