The global economy is in a terrible hole. After the longest expansion on record, global growth may drop by 40% in the second quarter of 2020 (annualized). Obviously, that decline is showing up everywhere, including the jobs market. The drop in employment over the past couple of months has virtually eliminated all employment growth the U.S. had seen this century. What a way to start a century!

The drop in employment is, unsurprisingly, uneven across industries. In this vein, how has the financial industry held up? Has it done better in 2020 than other industries? Here’s a look.

Breaking Down the Jobs Picture by Industry, % Change

First up, a look at the percentage change in employment by sector in the U.S.

Each row in the following figure is the broad industry. Each column is the percentage change for the first four months that the Bureau of Labor Statistics (BLS) has reported. The chart is sorted from worst to best performance for the month of April (reported on May 8th).

The industry with the worst performance was Leisure & Hospitality at a whopping -48%. If one includes the 2.5% drop in March, more than half of all employees in the Leisure & Hospitality Industry have lost their jobs.

The second hardest hit industry is Retail Trade at -13.7%, followed by Construction at -12.2%, Natural Resources at 11.9%, and Trade, Transportation, and Utilities at -11.1%. Simply terrible.

On the other end is the Federal Government, the only broad sector to have seen an increase in employment in April. Federal employment rose 1.4% in April, up slightly from March’s count.

Where does the financial industry fall? As a positive signal, jobs in the financial industry only dropped by 2.7%, the second “best” performing broad sector in April. The financial industry even performed better than state and local government employers, which saw their employment base drop 4.0% and 5.3% in April.

If you happen to have a job in the financial industry, you should definitely count yourself as lucky.

Breaking Down the Jobs Picture by Industry, Absolute Change

How do the figures look on an absolute basis? The following figure has that look.

Consistent with the prior view, the Leisure and Hospitality industry has lost the most jobs, down more than 8 million over March and April.

Other top five “losers” of the COVID-19 pandemic include Trade, Transportation, and Utilities at -3.1 million jobs over the March/April period, Education and Health Services at -2.6 million, Professional and Business Services at -2.2 million, and Retail Trade at -2.1 million.

On the other end, Federal employment grew by just 20,000 jobs in March and April, while state government employment dropped by 180,000, and the Information sector shed 258,000.

Where does the financial industry show up? In March and April, financial firms saw employment decline by 265,000 – not bad on a relative basis. Again, it’s a good time to be a professional in the financial industry.


Overall, the financial industry is doing relatively well compared to job losses in other industries. This is likely unsurprising given the relatively stable nature of the industry.


The coronavirus (COVID-19) has blown a hole in the global economy. In the European Union, Gross Domestic Product (GDP) receded 3.8% in the first quarter of 2020. In the U.S., first quarter GDP growth dropped off by 4.8%. In China, the start of the coronavirus pandemic, growth decline by a massive 9.8%. All indications are that second quarter may be even worse.

Second Quarter GDP

On the heels of the terrible first quarter will likely be the worst-ever GDP readings in the second quarter of 2020. Some economists have GDP in the U.S. declining by as much as 30% quarter-over-quarter (Q/Q) in the second quarter, with similar readings in the EU and less severe in China.

These incredibly weak projections suggest serious problems for the global economy heading into the third quarter of 2020.

Source: Econometric Studio

A Picture Perfect Private Equity Opportunity?

The global economy will be in massive hole heading into the third quarter of this year. By some measures, a $20 trillion hole (on an annualized basis). With such a massive drop, why would now be a potentially picture perfect opportunity to invest in private equity? The answer really comes down to four factors occurring simultaneously.

First, barring an unexpected revival in the virus on a massive scale in the latter half of 2020, the second quarter of 2020 will likely be the bottom for economic activity. This means there will be a massive push to make up that $20 trillion as quickly as possible.

Second, in response to the global pandemic, governments have advanced massive spending measures. Early responses from G20 countries summed to at least $5 trillion. By the end of the Q2, spending measures will likely reach $10 trillion or more.

Third, at the same time as a bottoming in economic activity is happening and governments are spending incredible amounts of money to respond to this pandemic, central banks continue to lower interest rates (or keep them at historically low levels), offer liquidity funding, and engage in quantitative easing. The historically low interest rates make potential private equity deals more valuable than ever but for the drop in economic activity.

Fourth, occurring at the same time as the just-mentioned three is a new, revived push for innovation. Although individuals are mostly the same, the relationships individuals have with each other may have changed, at least for the next few years. Innovation always presents the opportunity for large gains for the good private equity investors. No doubt, in a couple of years the private equity industry will have a pretty good idea of which private equity firms are the “new” kings of innovation investing. It’s hard to wait.

Summing Up

Overall, the downturn in the global economy stemming from the coronavirus presents private equity investors with massive opportunities if invested well. There is perhaps no better time than now to invest in private equity.


Venture capital and private equity data provider Pitchbook is out with a new, fresh look at how COVID-19 might influence the European venture capital (VC) and private equity (PE) market for the remainder of 2020. If you had to guess what the top five takeaways were, what would you guess?

Deep recession drives European VC and PE activity to virtually $0 in 2020? Or perhaps you’re the optimist, thinking that Covid-19 may lead to a very short-term, deep tick down in activity, made up for with an amazing third quarter of 2020?

Without further ado, here are Pitchbook’s top five takeaways on Covid-19’s likely impact on VC and PE activity for the coming months in 2020.

#1 VC Investors Become More Frugal in Response to the Pandemic

For some, this is a sad turn. VC investors looking at European companies will become more frugal in response to the pandemic, spending more time reviewing and evaluating the spending habits of prospective investments.

How can one say this with a chart? It basically means an end to the trend shown below. Instead of a steady increase in first-time and follow-on VC deals in Europe from 2019 to 2020, first-time and follow-on VC deals in the old world will likely collapse, perhaps to as low as what the industry saw in the early 2010s.

Source: Pitchbook

#2 Funding Gaps Will Force General Partners Towards Pre-Exiting Investments

When times become more uncertain, investments become more uncertain. The current situation may lead some general partners towards pre-existing investments. Why? Because when cash is tight, investors will tend to stick with companies they’ve already invested in. Funding gaps may push the money that way as well.

#3 Smaller General Partners Will Struggle Attracting Limited Partners More So than Large General Partners

The Covid-19 is no respecter of persons, but it does affect people and industries differently. In all likelihood, the chart below will look incredibly dire when 2020 figures are finally tallied for the entire year in around eight months from now.

The VC fundraising activity in 2020 could fall to lower than what was seen in 2010. That would equate to a drop from around €11 billion in 2019 to perhaps as low as €3 billion in 2010.

Source: Pitchbook

#4 Exits Will be Delayed

The fourth takeaway from Pitchbook’s report was that exits will be delayed. In 2019, VC exit activity in Europe summed to over €15 billion, down from the massive €53 billion in 2018, but still healthy.

It would not be surprising to see exit values drop below €3 billion, something not seen in the past two decades.

Source: Pitchbook

#5 Recurring Revenue Businesses Could Prove Very Important for Startups in the Ecosystem

The last takeaway from Pitchbook’s take on the Covid-19’s effect on VC and PE activity is that recurring revenue business models could become king. In times like this, cash can become king, which may mean that investable companies that show recurring revenue may see much more favorable deals than companies not pricing their services in this way.


Dealing with Covid-19 has been difficult for every investor across the globe, and European VC and PE investors are no different. Although now may be a good time to put some cash into VC and PE funds, the position of the funds relative to where they were just six months ago is not pretty. Let’s hope for a return to animal spirits and greater confidence in the ingenuity that PE and VC investors have always looked for.


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