How has Financial Employment Performed by President?

Pretty much everyone knows the western world is experiencing one of the worst recoveries on record.  This is quite evident when looking at the incredibly long time it took for employment to get back to where it was in 2008, by the tentative growth in GDP, by the weakness in wage inflation, by the stubbornly high unemployment rates, and by the inexplicably low central bank target rates.

In terms of politics, the weak recovery is one of the many reasons a majority of the American public is tired of the sitting Democratic president. With general frustration with the rate of the current economic recovery, one might ask – could the weak recovery have something to do with finance?

The simple answer to this simple question is surely yes.  The financial world affects large swaths of the business world, including the price of credit, the price of money, expectations formation, and the divvying up of risk, to name just a few.

Given the importance of the financial world to the economy as a whole, one way to inspect how well the financial sector is doing is looking at employment in the industry.

Financial Employment – by President

The figure shows the percentage growth in employment in the financial industry by president.  The horizontal axis is the number of months into the given presidency. Perhaps unsurprisingly, financial employment under President Obama is the worst in at least the past 60 years, with total financial employment still 1.2 percent below where it was in January 2008.

Financial employment performed the best under presidents Reagan and Eisenhower, with industry employment up over 27 percent during both individuals’ presidencies.  Financial industry employment also performed relatively well under presidents Truman and Clinton at 21 and 18 percent respectively.

One last interesting note is that there’s appears to be a long-term trend towards slower overall growth in the financial industry’s employment practice.  This is evident when noticing that the bottom four performing presidencies have been the past four presidents.  It, of course, doesn’t explain or excuse the lackluster jobs recovery in the financial industry under President Obama’s watch, but it does point to the fact that there are some underlying trends eating away at employment growth in the financial sector.  Unsurprisingly, the same trend is generally present in the overall employment figures, although to a much less noticeable extent.

What’s contributing to the slow financial industry recovery under President Obama?

Interestingly, professional labor market observers can point to at least a couple policy actions that are at least partially to blame for the poor employment recovery in the financial sector.

First, Dodd-Frank.  The latest political fireball lobbed at the financial industry has caused financial firms to rethink their role in commodity trading and other “politically sensitive” activities.  Second, banks are preparing for Basel III capital requirements and other banking regulations, which certainly put downward pressure on the profitability of certain activities. Both of these are Obama Administration initiatives.

Overall, when looking at employment in the financial industry by presidency, the current Obama Administration comes out on bottom, with presidents Reagan and Eisenhower on top.  Among the factors driving the poor recovery in financial industry employment are two policy decisions – Dodd-Frank and Basel III.