What has Private Equity Employment Done this Year?

August 5, 2013

With the Labor Department recently reporting that the economy added 162K seasonally adjusted jobs, one might wonder: how many jobs has the private equity industry added so far this year, and how does the private equity industry compare to other industries?

Here are the numbers.  Through the first six months of 2013, the private equity industry has added a little over a thousand jobs on an annualized basis, representing about a 2 percent annual growth rate.

The 2 percent annualized growth figure is closely in line with the historical average.  Overall, the industry is still operating about 600 jobs shy of the all-time high in August 2008 of a little less than 36K.

Comparatively, the private equity industry is doing relatively well when weighed against the hedge fund and investment banking industries.  Consider this data: the first figure shows the year-over-year growth in employment by industry by quarter.  When looking at the employment figures in this way, the private equity industry is about average, besting the investment banking industry by around 0.2 percent, but lagging the hedge fund industry by around 1 percent.

The second chart shows how employment has changed since the beginning of the “official” NBER economic recovery in 2009.  Interestingly, when looking at the employment figures from this angle, the private equity industry appears most stable, being the only one of these three sectors to now be above where it stood in 2009.  Overall, since 2009, the private equity industry is up about 2 percent, with the hedge fund industry down a little over 4 percent, and the investment banking industry down about 3 percent.

What’s the take away from this analysis?  Here are three points.

First, the private equity industry has the most stable employment base of the three industries.  This is likely unsurprising given the increased regulatory pressure being placed on the investment banking industry over the past four years (which has in turn decreased employment in the industry) and the more volatile bursts and busts of the more open hedge fund industry.

Second, all three of these financial sectors are growing faster than the economy at large, with the 2 percent year-over-year growth rates in the private equity and investment banking industries and the 3 percent year-over-year growth rate in the hedge fund industry besting the 1.4 percent year-over-year growth rate for the economy as a whole.

Third, the hedge fund and private equity industries are likely to surpass their all-time employment highs this year, with the investment banking industry still a few years behind.

Overall, employment in the private equity industry continues to grow, with total employment this year likely to surpass the all-time sector high of about 36K in August of 2008.  The private equity industry continues to be a more stable base than the hedge fund or investment banking sectors as well.

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