40  Monthly Labor Review • April 2011

The 2007–09 Recession: Financial Activities

Employment in financial activities: double 

billed by housing and financial crises

The housing market crash, followed by the financial crisis

of the 2007-09 recession, helped depress financial activities

employment; the industry recorded historic monthly job losses

that persisted even after the recession ended

George Prassas

George Prassas is an economist 

in the Office of Employment and

Unemployment Statistics, Bureau

of Labor Statistics. Email: prassas.

george@bls.gov

Historically, employment in financial activities1

 has been affected 

little by economic downturns 

and usually has grown during an entire 

recession or started to grow shortly after 

a recession began. (See chart 1.) In stark 

contrast, employment in financial activities grew more slowly in 2006 and eventually peaked in December 2006,2

 1 year 

before the official start of the December 

2007–June 2009 recession.3 Even after 

the recession ended, employment in financial activities continued to decline. 

(See chart 2.)

Leading into the 2007-09 recession, 

most employment losses in financial activities were concentrated in industries directly involved in buying and selling homes. 

However, after the stock market declined 

sharply in September 2008, all industries 

within the financial sector began to cut jobs 

at unprecedented rates. These employment 

losses were uncharacteristic compared with 

those sustained in previous downturns.

Prerecession housing crash

Over the past decade, employment changes 

in financial activities were tied closely to 

those in construction. (See chart 3.) Between 

2000 and 2006, roughly 40 percent of the 

job growth in financial activities occurred in 

industries directly related to the selling and 

buying of homes.4 During this period, construction employment grew by 976,000,5

 sales of new 

and existing homes increased by 14 percent and 

26 percent, respectively,6 home prices in the top 

20 major metropolitan areas in the United States 

doubled,7 and mortgage rates reached historical 

lows.8 In order to continue to qualify consumers 

for the purchase of a home, and to help drive the 

housing market, lenders offered more creative 

financing options, such as 40-year mortgages, 

interest-only loans, and jumbo loans, in addition 

to the typical business practices of offering loans 

based on fixed- and adjustable-rate mortgages, 

refinancing, and lending on the basis of home 

equity. According to the Federal Reserve Bank 

of Dallas, “although low interest rates bolstered 

homebuying early in the decade, the expansion 

of nonprime mortgages clearly played a role in 

the surge of homeownership.”9

In 2005, sales of new and existing homes 

in the United States peaked, and employment 

in construction and in several housing-related 

financial industries followed. (See chart 4.) 

Combined, employment in real estate credit, 

mortgage and nonmortgage brokers, and real 

estate agents and brokers reached a prerecession 

employment high in April 2006, corresponding 

with an employment peak in the construction 

industry, and then declined by 184,000 through 

December 2007. Real estate credit and mortgage and nonmortgage brokers respectively lost 

32 percent and 34 percent of their workforce 

during this period. Job losses continued through 
Monthly Labor Review • April 2011  41

 Chart 1. Financial activities index of employment, seasonally adjusted

–6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Index

(first month of

recession = 100)

Index

(first month of

recession = 100)

105

104

103

102

101

100

99

98

97

96

95

94

93

2007–09 recession

Recession average, 1945–2001

105

104

103

102

101

100

99

98

97

96

95

94

93

SOURCES:  U.S. Bureau of Labor Statistics, National Bureau of Economic Research.

 Chart 2. Financial activities employment, seasonally adjusted, January 1970–December 2010

Thousands Thousands

9,000

8,000

7,000

6,000

5,000

4,000

3,000

1970 1975 1980 1985 1990 1995 2000 2005 2010

NOTE:  Shaded areas represent recessions as determined by the National Bureau of Economic Research (NBER).

SOURCE:  U.S. Bureau of Labor Statistics.

9,000

8,000

7,000

6,000

5,000

4,000

3,000

Number of months since beginning of recession
The 2007–09 Recession: Financial Activities

42  Monthly Labor Review • April 2011

Construction

employment

 Chart 4. 

Index

(1999 = 100)

Index of annual rate of total homes sales, construction employment, and housing-related financial 

activities employment, seasonally adjusted, 1997–2010

160

150

140

130

120

110

100

90

80

70

60

160

150

140

130

120

110

100

90

80

70

60

Index

(1999 = 100)

Total home sales

Housing-related financial

activities employment

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NOTE:  Total home sales are the sum of seasonally adjusted annual rates of new and existing home sales. Housing-related financial industries

are real estate credit (NAICS 522292), mortgage and nonmortgage brokers (NAICS 52231), and offices of real estate agents and brokers (NAICS 5312).

Shaded areas represent recessions as determined by the National Bureau of Economic Research (NBER).

SOURCES:  U.S. Bureau of Labor Statistics, U.S. Census Bureau, National Association of Realtors.

 Chart 3. 

Thousands Thousands

Over-the-month changes in employment in construction and financial activities, 2000–10, 

seasonally adjusted

Financial activities

100

50

0

–50

–100

–150

–200

100

50

0

–50

–100

–150

–200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

SOURCE:  U.S. Bureau of Labor Statistics.

Construction
Monthly Labor Review • April 2011  43

the end of the recession, although at a slower pace. Between April 2006 and December 2010, housing-related 

financial industries lost 348,000 jobs and employment 

fell to its lowest level since January 1998.

By mid-2007, delinquencies in mortgage payments 

had begun to rise, particularly among consumers holding nontraditional loans.10 Depository institutions, 

such as commercial banks and savings institutions, 

started to announce job cuts, and many underwent 

internal restructuring and discontinued nontraditional 

loan lending. Employment in depository credit intermediation peaked in September 2007, leading the 

recession by 3 months. In October 2008, the financial 

markets experienced large losses, including a 17-percent decline in value according to the S&P 500 index.11

Commercial banks substantially decreased new loans 

and leases in bank credit. Job losses in depository credit intermediation accelerated, and employment fell at a 

record pace until reaching a trough in April 2010.

In 2009, loans and leases by commercial banks fell 

by 10.3 percent.12 Without credit, most firms were in 

unsustainable budgetary situations and cut payrolls. 

Employment losses throughout the economy were 

tied to the inability of firms to attain credit to continue 

their day-to-day business activities.

Financial crisis and job losses

With ongoing job losses occurring in financial activities industries related to the housing market crash, 

a financial crisis that began after the start of the recession 

pushed losses into other industries within the sector. Employment in the CES series titled “securities, commodity 

contracts, investments” had been largely unaffected during 

the first 9 months of the recession, but after the deterioration 

of the financial markets, job cuts quickly followed: between 

September 2008 and June 2009, 55,000 jobs were lost. (See 

table 1.)

Employment in insurance carriers and related activities 

also was unaffected during the first 9 months of the recession. However, year-over-year real personal consumption 

expenditures in insurance began to decline in April 2008 

and accelerated as the recession grew more severe.13 With 

large layoffs occurring in most segments of the economy, 

households continued to cut back on personal consumption 

expenditures; insurance expenditures decreased at an annualized rate of 4.7 percent during the fourth quarter of 2008. 

New individual life insurance premiums, the main revenue 

stream for life insurance companies, dropped 14 percent that 

quarter.14 The decline in personal consumption expenditures, 

followed by contracting credit markets, coincided with large 

layoffs in insurance carriers.

With both households and firms tightening their budgets 

and the loss of confidence in the market, establishments in 

rental and leasing services began to shed jobs. Employment in 

rental and leasing services generally follows the business cycle, 

because business in this industry is dependent on consumer 

spending. With personal consumption expenditures slashed 

and reduced access to credit, firms in automotive equipment 

rental and leasing and in consumer goods rental cut jobs.

Financial activities employment, selected industries, seasonally adjusted, December 2007–June 2009

Industry

December 2007 

employment

 level

September 2008 

employment 

level

June 2009 

employment 

level

Net monthly 

change in 

employment 

between 

December 2007 

and 

September 2008

Net monthly

change in 

employment 

between

 October 2008 

and 

June 2009

Financial activities................................................ 8,227.0 8,110.0 7,742.0 –13.0 –40.9

Credit intermediation and rela

 activities............................................................. 2,790.0 2,716.6 2,592.0 –8.2 –13.8

Depository credit intermediation ............ 1,825.4 1,809.0 1,758.0 –1.8

Commercial banking.................................... 1,358.4 1,355.7 1,316.3 –

Securities, commodity contrac

 investments....................................................... 855.9 861.0 805.4 .6 –6.2

Insurance carriers and related activities... 2,315.4 2,300.7 2,250.1 –1.6 –

 Real estate............................................................ 1,493.0 1,478.9 1,406.2 –1.6 –8.1

Rental and leasing services............................ 632.9 611.1 552.3 –2.4 –

Table 1.

[In thousands]

SOURCE:  U.S. Bureau of Labor Statistics.
The 2007–09 Recession: Financial Activities

44  Monthly Labor Review • April 2011

EMPLOYMENT IN FINANCIAL ACTIVITIES declined 

by 473,000, or 5.8 percent, during the historic 2007–09 

recession. The job loss experienced during that time was 

the largest in both absolute and percentage terms during a 

recession in the history of financial activities employment. 

First the housing market crash, and then the financial 

market crisis, hit financial activities employment. During 

2010, however, employment losses moderated, but the industry continued to lose jobs and employment decreased 

to levels not seen since 1998.

Notes

1 This article uses the term “financial activities” to denote the North 

American Industry Classification System (NAICS; see North American 

Industry Classification System: United States, 1997 (U.S. Census Bureau, 

1997), and North American Industry Classification System, 2002 (U.S. 

Census Bureau, 2002)) industry sectors 52, or “finance and insurance,” 

and 53, or “real estate and rental and leasing.”

2 The data on employment used in this article are from the Current 

Employment Statistics (CES) survey, a monthly survey of approximately 140,000 nonfarm business and government agencies representing approximately 440,000 individual worksites. For more information 

on the survey’s concepts and methodology, see “Technical Notes to Establishment Survey Data Published in Employment and Earnings” (U.S. 

Bureau of Labor Statistics, Feb. 4, 2011), www.bls.gov/web/cestn1.

htm (visited Apr. 12, 2011). To access CES data, see “Current Employment Statistics - CES (National)” (U.S. Bureau of Labor Statistics, no 

date), www.bls.gov/ces (visited Apr. 12, 2011). The CES data used in 

this article are seasonally adjusted unless otherwise noted.

3 Recessions are identified by the National Bureau of Economic 

Research (NBER), according to which the most recent recession began 

in December 2007 and ended in July 2009. The previous two recessions were from March 2001 to November 2001 and from July 1990 

to March 1991, respectively. For a complete list of business cycle dates, 

see “U.S. Business Cycle Expansions and Contractions” (Cambridge, 

MA, National Bureau of Economic Research, Apr. 4, 2011), http://

www.nber.org/cycles/cyclesmain.html (visited Nov. 2, 2010).

4 The housing-related financial industries are real estate credit, 

mortgage and nonmortgage brokers, and offices of real estate agents 

and brokers.

5 For an overview of construction employment trends during 

the December 2007–June 2009 recession, see Adam Hadi, “Construction employment peaks before the recession and falls sharply 

throughout it,” this issue, pp. 24–27. 

6 The Census Bureau defines sales of new homes on the basis of 

the condition that “A sale of the new house occurs with the signing 

of a sales contract or the acceptance of a deposit” (see “Comparing 

New Home Sales and Existing Home Sales” (U.S. Census Bureau, no 

date), http://www.census.gov/const/www/existingvsnewsales.html

(visited Apr. 12, 2011).) The house can be in any stage of construction. Data on sales of new homes are found in “Houses Sold by Region” 

(U.S. Census Bureau, no date), http://www.census.gov/const/soldreg.

pdf (visited Apr. 12, 2011). Data on existing-home sales are found in 

“Existing-Home Sales” (Chicago, National Association of Realtors, 

Mar. 21, 2011), http://www.realtor.org/research/research/ehsdata

(visited Apr. 12, 2011), and are provided by the National Association 

of Realtors®, which defines such sales on the basis of the condition 

that “the majority of transactions are reported when the sales contract 

is closed.” (See “Comparing New Home Sales,” which also discusses 

definitional differences between the two series.)

7 Data on home prices appear courtesy of the Case-Shiller Home 

Price Index for the top 20 metropolitan regions, in “S&P/Case-Shiller 

Home Price Indices” (New York, Standard & Poor’s, no date), http://

www.standardandpoors.com/indices/sp-case-shiller-home-priceindices/en/us/?indexId=spusa-cashpidff--p-us---- (visited Apr. 12, 

2011).

8 Data on mortgage rates appear courtesy of HSH Associates, in 

“Mortgage Rates Trends and Analysis” (Pompton Plains, NJ, HSH, 

no date), http://www.hsh.com/mortgage_rate_trends/National/30-

Year-FRM/2000-01_2011-01.html (visited Apr. 12, 2011).

9 See “Insights from the Federal Reserve Bank of Dallas,” in Economic Letter (Federal Reserve Bank of Dallas, November 2007), http://

www.dallasfed.org/research/eclett/2007/el0711.html (visited Apr. 

12, 2011).

10 See various charts on residential mortgage foreclosure and delinquency rates from the Mortgage Bankers Association and Haver 

Analytics, http://www.richmondfed.org/banking/markets_trends_

and_statistics/trends/pdf/delinquency_and_foreclosure_rates.pdf 

(visited Apr. 12, 2011). 

11 S&P 500 index data appear courtesy of Standard and Poor’s. 

(See “S&P 500” (New York, Standard & Poor’s, no date), http://www.

standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-

usduf--p-us-l-- (visited Apr. 12, 2011).)

12 The Federal Reserve collects data on loans and leases by all 

commercial banks. To access the data, see “Assets and Liabilities of 

Commercial Banks in the United States (Weekly) – H.8” (Board 

of Governors of the Federal Reserve System, Apr. 1, 2011), http://

federalreserve.gov/releases/h8/current/default.htm (visited Apr. 

12, 2011).

13 In this article, data on real personal consumption expenditures for 

insurance are from the Bureau of Economic Analysis. (See “Table 2.4.6U.

Real Personal Consumption Expenditures by Type of Product, Chained 

Dollars,” entry 264 (Bureau of Economic Analysis, Mar. 28, 2011), http://

www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?

SelectedTable=18&FirstYear=2009&LastYear=2010&Freq=Qtr&

ViewSeries=Yes (visited Apr. 12, 2011).)

14 In this article, data on annualized life insurance premiums appear courtesy of the Life Insurance and Market Research Association. 

(See “LIMRA Reports Sharp Quarterly Drop in Individual Life Insurance Sales” (Windsor, CT, LIMRA International, Feb. 24, 2008), 

http://www.limra.com/newscenter/newsarchive/archivedetails.

aspx?prid=83 (visited Apr. 12, 2011).)