From the monthly archives:

April 2015

Investment bankers are typically interested in broad policy issues like the minimum wage as it affects economic growth, which in turn affects investment banking conditions. Some of the most contentious debates among economists centers on how much harm the minimum wage causes to individuals in so-called low wage industries.

With the recent release of the Bureau of Labor Statistics’ (BLS) job numbers by state for 2014, now is probably a good time to review what job growth did in states that imposed higher minimum wage rates compared to states that left things up to the employer and employee.

Minimum Wage Rates by State

Before addressing what kind (or if) there’s been a connection between higher minimum wage rates and missing employment, here’s a look at what minimum wage rates have been by state since 1980.

Among just states, as of now, the state of Washington has the highest minimum wage rate at $9.47 per hour. If one throws Washington D.C. into the mix, D.C. has the highest imposed minimum wage rate at $9.50 per hour. Overall, 29 states and Washington D.C. have minimum wage rates above the federal minimum wage rate of $7.25 per hour.

(Please note that the following graphic is not meant to be decipherable by state, but rather presented solely to show that a number of changes have occurred over the years.)

Minimum Wage Strings

New Rates Coming Up

One interesting observation in the previous graphic is the seasonality in newly imposed minimum wage increases. States generally don’t impose higher minimum wage rates until economic times are good or are improving (thus the jump in 2014).

In addition to the hiked rates in 2014, a number of new minimum wage increases are slated for 2015, 2016, and beyond. The list includes scheduled increases in Alaska, Arkansas, California, Connecticut, Delaware, D.C., Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New York, Vermont, and West Virginia.

More details on upcoming increases are available here.

Retail Sales Growth

The second component of this study is employment growth.  Of the industry’s most likely affected by higher minimum wage rates is the retail sector.

Here’s a look by state according to whether a state increased or decreased its minimum wage rate. It’s tough to see a strong variance, although there is a small difference. As one would expect, retail employment grew 0.71% in states that did not impose higher minimum wage rates and 0.66% in states that did impose higher minimum wage rates.

On total employment growth of around 2.5 million, the difference between the two would indicate that there’s about 38,000 jobs missing because of the higher minimum wage.

The result is not statistically significant, but the next section finds significance.

Retail 1.fw

Connection Between Minimum Wage Rates and Retail Sales Employment Growth Acceleration

The finding that perhaps 38,000 jobs might be missing in 2014 due to a higher minimum wage rates was only weak, and not statistically significant. Rather than testing “growth,” which is the year-over-year change in employment, the effect most likely showed up in “acceleration” or “deceleration”. Essentially, acceleration or deceleration relate to how the year-over-year growth rate is changing, rather than total jobs. Usually, financial signals show up here first.

Here’s a look at what happened to the change in year-over-year growth according to whether a state hiked its minimum wage. Interestingly, the effect is much larger.

States that left things as is – i.e. did not impose higher minimum wage rates – saw retail employment accelerate, meaning job growth got stronger.  The acceleration is +0.6%. In contrast, states that hiked their minimum wage rates saw retail sales employment decelerate, meaning job growth got weaker.  The deceleration is -1.4%.

Minimum wage 2.fw


Overall, states that imposed higher minimum wage rates in 2014 saw employment growth in the retail sector decelerate, by 1.4%. In contrast, states that left things as is saw retail sales growth accelerate, by about 06% on average. The difference equates to about 38,000 jobs missing from minimum wage-hiking states.

It is, of course, too early to make a complete judgment on the extent of missing jobs due to higher minimum wage rates.  With that said, early evidence points towards a reasonably strong negative effect on retail sales employment.


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On the first Friday of every month, the U.S. Bureau of Labor Statistics (BLS) gives us their take of employment growth overall and by broad industrial groups.  Friday’s top line growth figure came in at +126K in net new jobs for the month of March.

Although the top line figure is the most influential on market performance, the industry details provide an interesting insight into where jobs are showing up and how quickly the economy is recovering in various sectors.

A Month over Month Look at Employment Growth by Industry

First, here is where U.S. jobs have come from through the first three months of 2015. Interestingly, the largest job growth area is still Education & Health, up 137K.

The other members of the top five growing industries (by broad classification) include Trade, Transportation, and Utilities (128K), Leisure and Hospitality (107K), Professional and Business Services (102K), and Retail Trade (94K).

In the middle of the pack is Finance, up 34K through the first three months of 2015.

Employment Growth in 2015 by Sector

On a Percentage Growth Basis

The absolute growth figures can sometimes be misleading because of the sizes of the various industries.  Here’s a look at year-to-date (YTD) percentage growth difference. When viewing the growth numbers from this perspective, some shifting occurs.

On top is Construction, up 1.10%.  The remaining members of the top five include Leisure & Hospitality (up 0.72%), Education & Health Services (up 0.63%), Retail Trade (up 0.60%), and Natural Resources (up 0.56%).

Down towards the bottom of the list is Finance, up 0.42%.

Percentage Employment Growth in 2015 by Sector

A Broader Perspective: Industry Job Growth Since the Recession

The fact that Finance is currently an average to slightly below average industry begs the question – when will Finance see its employment boom? The following is a broader view, looking at where job growth has come from since the onset and recovery from the 2008 global recession.

The graph is labeled by business cycle peak year, with each colored line being the the year in which a peak occured. The horizontal axis is the number of months into the recovery. The vertical axis is the percentage change in employment (cumulative) since January 2008. As shown, the Finance industry is still 2% below where it was in January 2008, which is lower than what many other industries have experienced.

What does this suggest?

This suggests at least two things. First, Finance has little downside in terms of employment growth. Second, a boom is likely still on the horizon for the Finance industry.  (When the boom will materialize is still up for debate, but one thing is more certain, a boom will eventually materialize).

Financial Employment from Peak


Overall, employment in the financial industry appears poised for strong growth after a few years of sub-par job creation. If the early indications of 2015 are indicative of the remainder of the year, investment banking and the other big sectors of the financial industry could be headed for a banner year.

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