How has financial employment held up during the pandemic?

Every now and then, we like to take a look at the performance of the financial industry compared to other brought industry groupings. Today’s look goes through October 2020 – the most recent month for which data are available.

As background

As background of the situation, the following looks at the part-time employment picture. With around 6.7 million part-time employees, the picture for employment is improving, although nowhere near where it needs to be. The picture, though, is more positive than some presume by simply comparing the current part-time employment picture with that of the global financial crisis-induced Great Recession. Part-time employment in 2020 has come back much quicker during this so-called recession than it did during the Great Recession.

Source: Econometric Studios, BLS

An industry comparison

With the background set, the following looks at employment by broad industry classifications over the course of 2020. Before looking, could you guess which industries have been hardest hit and which industries have barely missed a beat?

The first look is on an absolute change since December 2019. The table is sorted by best performing to worst performing broad industries.

The results likely present few surprises. The best performing sector was the Federal Government, which has grown its employment base by 146,000 since the end of 2019. The Federal Government is the only broad sector to report growth. Must be nice not to have to worry about balancing a budget!

Interestingly, in second place is Finance. The financial activities sector has only lost 98,000 jobs over 2020. Low interest rates and federal stimulus likely contributed to this picture.

The next best performing industry grouping has been the Construction sector, with employment employ down 210,000 for 2020 so far – and improving.

Shifting to the bottom right portion of the table, employment in the Leisure & Hospitality industry (i.e. hotels, models, travel companies) is down 3,403,000 so far through the first ten months of 2020. The picture is certainly not bright for the tourism industry.

The other two worst performing industries through 2020 have been Education & Health, down 1,205,000 jobs, and Professional & Business Services, down 1,102,000.

The takeaway – it pays to work in the financial industry in a time of economic weakness – at least usually.

Source: Econometric Studios, BLS

The last figure looks at the employment picture on a percentage change basis. The reported percentage change is the percentage change since the end of 2019. Before looking, given what has been presented on an absolute basis, take a guess on the percentage change basis.

Unsurprisingly, the top performing industries on a percentage change basis include the Federal Government (+5.13%), Finance (-1.11%), and Construction (-2.78%).

On the other end, the three worst performing industries include Leisure & Hospitality (-20.28%), Information (-8.71%), and State Government (6.56%).

Source: Econometric Studios, BLS

Conclusion

Overall, on a comparative basis, the financial industry is holding up fairly well. Over the course of 2020, the industry has been a relatively stable source of employment for many millions of global employees. Perhaps it pays to work in the industry that controls all the money?

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Contrary to what some might think, private equity and venture capital funding is still doing well across Europe in 2020. In a fascinating look, provided by private equity data provider Pitchbook and sponsored by fladgate, the view is almost too good to believe. Here’s a review of the finding.

Deal Activity

The first view of the European picture is on the venture capital deal activity. The following figure depicts deal value and deal counts across Europe from 2010 through September 30, 2020. Fascinatingly, the picture is incredibly positive.

Many prognosticators would have thought that the coronavirus pandemic would have basically shut down activity. That hasn’t happened. Instead, venture capital activity through the first three quarters is already above the entire 2018 year’s activity, which was the second highest on record – behind only 2019. At €29.5 billion, 2020 may turn out to be the highest in the past decade, if not ever. Through the first nine months of 2020, there have been 4,646 deals.

Source: Pitchbook

Type of Deals

With the broader picture quite positive, how does the breakdown look? The following is a look is a makeup of the venture capital deals by stage of investment. Interestingly, although somewhat concerning, deal activity is growing strongest in the early and late stage venture capital. The angel and seed stage activity has slowly become smaller, having declined from almost half of all investments in 2014 to just above 30% in 2020.

Source: Pitchbook

A Sector View

The sector view also provides an interesting perspective. The largest area of investment activity in 2020 so far has been in the software sector, accounting for around a third of all investment deals by euro volume. The other two sectors that account for a large portion of activity are biotechnology and pharmaceutical investments and other areas of investment. When summing these three areas, the total percentage of all investment euros going to these three sectors sums to almost 70%.

Other sectors listed in the report include media, information technology, health care services and systems, health care devices and supplies, energy, consumer goods and recreation, and commercial services.

Source: Pitchbook

Activity with U.S. Investor Participation

What about investor activity with U.S. investor participation? That picture is shown below. Overall, the relationship between U.S. investor participation and Europe activity has slowed somewhat in 2020, down to 769 deals across €16.1 billion in deal euro volume.

The all-time high for activity was in 2019 at 1,099 deals across €19.1 billion in euro deal volume.

Source: Pitchbook

Summing Up

Overall, it has been an unbelievably strong year for private equity and venture capital activity across Europe. The old adage goes that one “should never let a good crisis go to waste.” That certainly appears to be the case for private equity and venture capital investors across Europe in 2020.

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By most measures, the second quarter of 2020 is a quarter to lightly forget. Global economies shut their doors in fear of what the coronavirus meant for human health. Deal making in the private equity/venture capital (PE/VC) universe slowed as well, as firms put off potential funding steams and exit strategies.

That slowdown changed on a dime when economies began opening up in the third quarter of 2020. Here’s a look at how private equity/venture capital deal making faired in the third quarter this year.

The Backdrop

Up first is the backdrop. As shown, PE deal activity through the first three quarters of 2020 is down sharply from previous years. A similar trend holds for deal value.

For the entire 2019 year, the number of deals reached 4,202, down slightly from the decade high of 4,213 in 2018. Deal value also leveled off in 2019 across Europe, declining slightly from €477.8 billion in 2018 to €459.9 billion in 2019.

Through the first nine months of 2020, deal volume sits at €316.3 billion on 2,791 deals. Unsurprisingly, both figures are down from the full 2019 year. This picture, though, masked the zoom of a comeback PE and VC activity has seen since economies began to open up again in the third quarter of 2020.

Since flattening in the second quarter, the number of PE deals is up 33% in the third quarter of 2020 compared to the second quarter.

Source: Pitchbook

Deal Size

One way to view how healthy the PE and VC investor market is doing is the median PE deal size. That view follows below. Interestingly, deal size has held up fairly well at €22.8 million. This is the second highest on record, behind 2019’s all-time high of €29.0 million.

Source: Pitchbook

Interestingly, although median deal size is down somewhat from the 2019 heydays, but still strong by historical measures, the number of PE deals under €25 million continues to slow down – likely reflecting the increasing value of deals. The number of deals under €25 million, as measured by a 4-quarter rolling average, is just about 1,500 – not grand, but not collapsing either.

Source: Pitchbook

Deals by Region

Lastly, we take a view of PE deals by region. The leader in the number of deals by region is the UK and Ireland, followed by DACH and France and Benelux. Smaller number of deals also occurred in Southern Europe, the Nordic Region, Central & Eastern Europe, and Israel.

Source: Pitchbook

Summing Up

In a somewhat surprising fashion, when economies began opening up in the third quarter of 2020, European deal making zoomed ahead. Presuming no further shutdowns to end 2020, and the 2020 years as a whole may turn out to be fairly healthy for the private equity/venture capital universe. Fingers crossed.

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Not a Lot of Love for the Internet of Things During the Pandemic of 2020

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13 Million to Go

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Private Equity/Venture Capital Is Not As Bad As Some Might Think

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Recently, private equity data provider Pitchbook released their Q2 2020 state of the venture capital (VC) / private equity (PE) markets. The report provides an interesting glimpse into the state of PE and VC leading up to and over the course of the coronavirus pandemic. Spoiler alert: The PE and VC universe is not as […]

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Predictions Versus Reality in Private Equity 2020

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Private equity data provider Pitchbook is out with a fascinating look at their 2020 predictions versus reality so far. The predictions made by Pitchbook were likely not much different that most private equity forecasters. As such, here’s a look at expectations versus reality. Forecast #1: The median pre-money valuation for seed-stage companies will eclipse $8.5 […]

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