2014 is coming to an end. With the year almost over, it seems fitting to review h ow private equity employment did through the year and what we can expect for the year ahead.
A Look Back at 2014 – Actual Employment
The following is a look at total private equity employment since 1990. Overall, the soon-to-be-finished year was relatively good to employers and employees in the private equity field. Employment by firms classified as private equity added around 1,400 net new jobs this year, representing an increase of about 4 percent. In hindsight, private equity industry employment is likely to have been the best year ever for total industry employment, having averaged a little over 36,000 for the entire year.
The industry is well on a recovery path after bottoming in May 2010 at around 33,000. In terms of trend, this year will mark the fourth year of upward momentum in employment growth for the industry.
The previous cycle, from October 2003 to August 2008, lasted almost 5 years.
Sources: Econometric Studios, Moody’s, BLS
Looking Back at Year-Over-Year Growth
In terms of the year-over-year growth rate, 2014 looks even stronger. The year 2014 started off with a bang, with year-over-year employment growth accelerating from 3 percent to 4 percent in July. By contrast, the economy as a whole was only adding jobs at a 1.7 percent to 1.9 percent pace. The rate of growth decelerated a little bit in the (estimated) latter half of the year, going from 4 percent to 3.6 percent. The economy as a whole is anticipated to have generated a year-over-year growth rate of about 1.9 percent.
The year-over-year growth rates for the current business cycle are generally good. The industry appears to have avoided any potential “bubble” employment compared to previous peaks. In October 2006, private equity employment was expanding by over 5 percent. Interestingly, the previous two big private equity employment cycles were enormous by current standards.
In September 2000, private equity employment was expanding at a 10 percent year-over-year growth rate. In March 1994, private equity industry employment was speeding by at an 11 percent year-over-year growth rate.
In all, year-over-year private equity employment growth is somewhat subdued for private equity business cycles, although the industry is still adding jobs at twice the pace as the economy as a whole.
Sources: Econometric Studios, Moody’s, BLS
Looking Forward to 2015
With the actual experience and year-over-year growth rates established, what can we expect in the coming year?
Well, if economic indicators are correct, 2015 is set to be a banner year. The first graph has the statistical ranges for the private equity employment forecast. Overall, statistics says a projected range of around plus 3,000 to minus 2,000 net new private equity jobs, with the mid-range of around 1,000.
What the statistical forecast doesn’t capture is the economic indicators. If economic indicators are correct, private equity employment may expand by 5 percent or 6 percent in 2015, meaning a total of 2,000 net new jobs.
Conclusion
Overall, in looking forward to 2015, the private equity industry appears poised for further expansion. A baseline forecast is for the industry to see net new job creation of at least 2,000 new jobs in the coming year, bringing total industry employment to almost 39,000. Employment in the industry at 39,000 would far surpass any previous year.
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