[lbo-talk] Stock Markets vs the Real Economy

[SA]

On 8/9/2011 10:44 AM, Julio Huato wrote:


> Seth wrote:
>
>> I'm asking you as an economist: If this were true (Michael's "reverse finance capital"), what sort of pattern would we expect to find in the data?
> Do you mean an out-of-trend switching of jobs into the "financial
> industry" (and in other industries' "financial" functions) from other
> private-business employment?

Hey, good idea, Julio! Let's try that!

Here's a chart that shows the finance industry's shares of employees and 
fixed investment, from 1948-2009:

http://bit.ly/nsdCj0

Note that the employee data is collected at the *establishment* level. 
That means employees of GE Capital or the Sears finance dept are 
classified as finance, not manufacturing or retail. The investment data 
is collected at the company level - yet the two trends move basically in 
tandem anyway.

[Note: The series breaks are due to slight changes industry definitions 
for the employee series. The investment series is consistent.]

Now: what if anything does this tell us about the validity of Michael's 
claim that "When few good prospects for real investment exist, people 
look for financial opportunities"?

SA