Has Wall Street Escaped Job Losses?

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 (click to enlarge):

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.