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December 2005, Vol. 128, No. 12
Bears, bulls, and brokers: employment trends in the securities industry
Michael H. Strople
Over the past several years, Americans have dramatically increased the amount of personal savings held in equities. This phenomenon, together with a general shifting of savings from interest-bearing deposits and bonds to individual stocks and mutual funds, has peaked awareness in investing. A pronounced shift from defined-benefit retirement plans to employee-funded plans has placed workers’ retirement nest eggs more directly in the stock markets.1 The ebbs and flows of the stock market generate much attention from individual investors. However, these cycles also have a direct impact on workers in the securities industry.
As measured by the Current Employment Statistics survey, employment in securities, commodities contracts, and investments appears to be highly cyclical, rising and falling much like the markets themselves.2 The industry experienced modest job declines during the 1990–91 recession, rebounded during the expansion of the mid-1990s into 2000, declined once again with the 2001 recession, then rebounded in late 2003. This article examines whether the higher participation in the stock market (measured by stock market volume) or stock values (measured by stock prices) have influenced the employment cycle.
Brokers: securities industry employment
Since January 1990, there have been two periods of sustained employment weakness in the securities industry—1990–91 and early 2001 through October 2003. Both of these time periods coincided with or followed economy-wide recessions, reflecting the general parallel between cycles in the securities industry and the business cycle.
The recession of the early 1990s, which the National Bureau of Economic Research (NBER) designated as lasting from July 1990 to March 1991, was mild in terms of job losses in the securities industry.3 From the February 1990 employment peak to the February 1991 trough, the industry lost a modest 9,000 jobs, and then employment remained rather stagnant. By January 1992, employment had returned to its prerecession peak. So, while losses were mild over the recessionary period, the initial recovery was tepid at best.
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1 1998 Survey of Consumer Finances and 2001 Survey of Consumer Finances (Federal Reserve Board) on the Internet at http://www.federal reserve.gov/pubs/oss/oss2scfindex.html (visited December 12, 2005).
2 Data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys 160,000 nonfarm businesses representing about 400,000 establishments monthly. For more information on the program’s concepts and methodology, see BLS Handbook of Methods, on the Internet at http://www.bls.gov/ces/ (visited August 5, 2005). The employment series used in this article begins in 1990 and is seasonally adjusted. The term "securities industry" is used interchangeably with 2002 North American Industry Classification System code 523, Securities, Commodity Contracts, and Other Financial Investments and Related Activities.
3 For more information on recessions, recoveries, the National Bureau of Economic Research Business Cycle Dating Committee, and related topics, see the National Bureau of Economic Research website, on the Internet at http://www.nber.org/cycles/main.html (visited December 12, 2005).
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