Securities: How the mighty have fallen

The CHART OF THE DAY shows the number of people employed in New York City in “securities and commodities contracts intermediation and brokerage,” which includes investment banking and securities dealing,

People working fell to about 101,200 in March, a decline of more than 30 percent from the peak in December 2000 (nearly 155,000 workers) and the fewest in Bureau of Labor records dating to 1990.

Now I know some of you technical analysts may look at the chart and say ’ oh look, we’re at the trough and ready for a rebound’ But with the new captl requirements, govt regs, and permanent losses to electronic trading and consolidating industries… the only rebound we get may be a dead cat bounce.

I pulled up the series for thousands in finance and insurance in New York City. This series is currently at 315k above the lows from 2010 (306k). Still there is a long-term trend of decline. In 1990, the series is near 420k. Computer science employment has been one of the fastest to recover (and fastest growth since 1990), while USPS and music store employment has been some of the worst to recover (and also worst performance since 1990). Relative to the other categories, finance is still much closer to the bottom than to the top.

You know, every day, it starts looking like Karl Marx was more and more right, at least about the problems of capitalism (unfortunately his solution was worse than the disease, though, arguably, his solution wasn’t really defined enough to be a solution - it was the implementation by Lenin and further corruption by Stalin, Mao and others that was truly worse than the disease).



^It’s like they’re pulling financiers from their Rolls and hanging them by their Valentino ties…or not. You’re rather vague about what Marx was right about in his critique of capitalism and how that relates to falling securities industry employment. Is it the wage slavery of the guy M&Ain’ it on the buyside?

I admire Grantham immensely. I really like the fact that he can appreciate the good things about capitalism without becoming blindly religious about the fact that there are some bad things, and that those bad things can sometimes matter greatly.

The interesting thing about corporations, though, is that in a wierd way, the long term actually does matter. Half of the S&P 500’s present value (as a discounted cash flow of dividends, but there are also other ways) is composed of profits that are over 2 decades away. The median time frame increases even farther out, if you consider the unusually low interest rate environment.

Ironically, they ought to care about long-term sustainability, but they are panicked about the 2-5% of their valuation that comes from the next 12-36 months. I understand the bahavioral issues that drive it, but it is odd that they would care so little about where the bulk of their value comes from… it’s basically the greater fool theory writ large “I can get someone to take my place at the helm before I have to pay any consequences.”

Maybe I’m just cynical, but LT job creation still seems just as weak as the ST. I can think of many examples where industries could lose jobs due to technology or innovation.

But clearly, we are not a true capitalist society either. We are some balance between capitalism and socialism. US government spending is 40% of GDP! So, obviously, there is a ton of central planning going on, and we are using a huge amount of resources to try to accomplish some social goal. For instance, companies cannot dump toxic waste into the environment that will explode in 30 years; regulation prevents them from doing this. Companies and individuals cannot just fuck up other people for self benefit either - the government makes laws that protects minorities, union workers, illegal immigrants, poor people, old people, unhealthy people, ugly people, etc.

RE: the original topic of finance workers. I suppose some job categories and companies are hurt more than others. For instance, if you work for UBS, your US job is nuked. If you work for GS, maybe your pay goes down 10%, but you are probably still employed. Similarly, if you worked for a prop trading desk (*cough Deutsche Bank*), your job is gone. If you have a legitimate customer business, then you are a bit more secure. If you work for Vanguard or BlackRock, you are laughing as people pile into ETFs and mutual funds.

Of course, no matter who you are in finance, you’re probably not too optimistic about the industry in general. Everyone is taking it year by year. I just want to avoid attrition for say, another 8-10 years. I think that will be enough.

BChad, you should read this if you haven’t:

It is where the quote is from and explains his views on why corporations and economics don’t currently value the long term. Also covers debt/gdp, farming, energy, the problem with assuming unlimited growth, etc.

Thanks for this… it’s a lot of reading to slog through on a busy day, but I want to get to it.

I just read it on my phone during down times over the period of a couple days. I think that’s one of the only ways, besides blocking off time in the evenings circa-CFA studying days.

The few that are left in NYC must be cleaning up when it comes to HCBs. The supply is decreasing (fewer BSDs). HCBs will have to adjust in order to get the undivided attention of a man or risk sharing him with other HCBs.