Why finance jobs are dependent on the economy

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

How much does the state of the economy affect jobs in the finance sector? According to the U.S. Census Bureau’s County Business Patterns data, different industries in this sector exhibit significantly different patterns.

Most of all, we are interested in how finance jobs were affected by the 2007-08 crisis, and if they are influenced by financial markets.

First, we look at the total number of establishments:

est_number_by_sub

Here we see three different patterns. Firstly, the credit intermediation industry experienced rapid growth until 2007, after which it went into decline. The securities, commodity contracts and other financial investments and related activities industry (which we will refer to as simply “financial investments”) showed slower, but steady, growth. Lastly, there was no significant change in the insurance carriers industry.

Another pattern emerges when we look at the average payroll of finance jobs in these three industries. The chart below depicts the relative change in average payroll compared to the 2002 numbers.

finance_avg_by_sub_disc

It is clear that the financial investments industry has much more volatile payrolls, which cannot be attributed simply to a lower total number of establishments. Once we plot a similar line for the S&P 500 index, however, it becomes clear that these payrolls are highly dependent on the current state of the financial markets.

Now that we have seen how this specific industry is more dependent on the external factors than the other two, let’s examine the geographic structure of the employment in the finance sector.

It appears that the relative number of financial investment establishments differs significantly from state to state, ranging from about 10 percent for states in the Southeast to about 25 percent for states in the Pacific and Northeast regions, peaking at one in every three establishments in New York and Delaware. We can assume, therefore, that the finance jobs in these states are somewhat more dependent on the economy.

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About Andrey Kamenov

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

Andrey Kamenov is a data scientist working for Advameg Inc. His background includes teaching statistics, stochastic processes and financial mathematics in Moscow State University and working for a hedge fund. His academic interests range from statistical data analysis to optimal stopping theory. Andrey also enjoys his hobbies of photography, reading and powerlifting.

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