Author: Bonnie Queen
In May, the New York Times published a piece by Neil Irwin entitled, “Wall Street is Back, Almost as Big as Ever”. This article detailed the evolution of employment and wages for workers in the securities, commodity contracts, investments, and fund and trusts industry compared to all private workers.
Somewhat surprisingly, Irwin found that the recovery of the financial industry is “strong and broad enough to suggest that the great financial crisis of the early 21st century will have an effect different from that of its 20th-century counterpart (the Great Depression)”. The number of people working in the securities industry has returned to 2007 levels. Workers on Wall Street earn almost the same as they did when the crisis hit, and the financial sector, as a whole, is reporting profits that are roughly the same share of the economy as they were in the early 2000s.
At LEAD, we looked at data to see if these trends hold in North Carolina as well. The financial sector in North Carolina is significantly less concentrated when compared to New York. Still, Charlotte has become known as a hub for banking activity and the financial sector has generally been growing in North Carolina.
In this analysis, LEAD used Quarterly Census of Employment and Wages (QCEW) data to examine the subsectors Financial Investment and Related Activities, and Funds, Trusts and Other Financial Vehicles. These sectors notably exclude traditional banking –- a sector that has had varied patterns since the Great Recession began.
The graph below shows the employment in these two industries –- which we broadly label the securities industry –- as a share of total private-sector employment. Although the percent of private sector employees in this industry is relatively small, it has been steadily increasing since 2000, despite the Great Recession beginning in December 2007.
It is important not to confuse share of private sector employment with total number of jobs. Indeed, the graph below shows that total employment did fall during the Great Recession, but rebounded by 2011 and has continued to increase. Part of the story may be that North Carolina has experienced tremendous population growth over the past two decades, and some of the employment increases may be a natural extension of population growth –- more people have more need of financial services.
Finally, we examined what has happened to wages and salaries in this industry compared to all private sector industries. The graph below shows that employees in the Financial Investment and Related Activities subsector were earning almost four times as much as private sector employees in 2000. By 2014, these workers were earning slightly less than three times that of all private sector employees. Wage and salary compensation for workers in the Funds, Trusts, and Other Financial Vehicles subsector has remained relatively constant at 1.6 times that of all private sector employees.
It has now been seven years since the financial crisis wreaked havoc on the U.S. and other global economies. Despite the extent of this crisis, and contrary to the experience during the Great Depression, the securities industry has continued to grow. However, the industry also continues to face heightened regulation and it is unclear the effect this will ultimately have on the size of the industry. It's possible the industry may evolve differently in North Carolina due to its smaller initial size and continued population growth.