Every now and then we review how the financial sector is doing. Before looking, which U.S. state would you guess is #1 for financial sector employment? Would you guess New York – the home of Wall Street? Perhaps Chicago (Illinois), with its heavy focus on insurance services? What about California, with its heavy focus on venture capital and private equity professionals?
What about growth? Which states would you guess have the strongest absolute growth in financial sector employment? Perhaps places with lower income tax burden, such as Florida or Texas? Perhaps the largest population states – California, New York, Florida, Texas – would lead the pack here? Or, perhaps the high cost of living in these states is pushing the financial sector to employment in other states?
Take your guesses now, because the answers follow.
Where is the Base of Financial Employment
First, a look at where the base of financial employment is headquartered. The tree map below is average monthly employment in the financial sector by U.S. state for the first seven months of 2018. Interestingly, financial firms headquartered in California hold first place, with about 5.9 million employees.
The remaining states in the top five include Texas (5.4 million), New York (5.0 million), Florida (4.0 million), and Illinois (2.7 million).
Unsurprisingly, the financial employment base in a state is moderately related to the population base of a state. This correlation, though, is not perfect, and the industry is certainly changing where it wants to be headquartered.
Source: BLS
Where is Financial Employment Growing?
The relatively moderate connection between the population base and the financial industry employment base means that we need to look at growth measures to see how things are changing. The following line graph has the growth in financial industry employment by state from 1990 through July 2018.
The chart provides no really big surprises. The biggest population states show the strongest absolute growth in employment. On top is California, with approximately 800,000 new financial industry employees in 2018.
Perhaps the most surprising finding is the strength of the financial industry in Texas. Financial industry employment growth in Texas is closing in on California’s 800,000, and if the economy continues to expand, financial industry employment in Texas may surpass California within the next few years. Guess it pays to have a reputation of light regulation, no income tax, and a population that is entrepreneurial and independent by nature.
Source: BLS
Where is the Growth Rate in Financial Employment Strongest?
The previous two sections had a fair amount of connection with the population base, meaning that financial industry employment grows by more the larger the population of an area is. Reported here is the growth rate experience.
Before looking, take a guess at which states have the strongest financial industry employment growth rate? Would you guess small states, such as Massachusetts or perhaps states with no income tax, such as Nevada? The result follows.
Interestingly, the top state for financial industry employment growth rate is … drum roll please … none other than … New Mexico. The financial industry has expanded by an average of 4.3 percent for 2018. Surprised? We were too.
The other top growing states for the financial industry include Idaho (4.2 percent), Wyoming (3.7 percent), Washington (3.4 percent), and Florida (3.0 percent). Interestingly, only one of the largest states with a financial industry base also shows up with a strong financial industry growth rate.
Source: BLS
Conclusion
In a look at the financial industry’s employment base, some interesting and unsurprising results appear. Perhaps the most interesting result is the growth of the industry in certain states, while the weakest of the financial industry in other states. Times are changing, and so is the financial industry.
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