Texas Overtakes New York as the New Banking Hub in the United States
JPMorgan Chase’s massive expansion in Texas reflects a broader shift in the banking industry
JPMorgan Chase, the largest bank in the United States, is building a new headquarters in midtown Manhattan. However, it is no longer in New York where the bank employs the most people. Texas has emerged as the new banking hub, with JPMorgan Chase employing 31,500 individuals in the Lone Star State, surpassing its employee count in New York by 2,600. This trend is not unique to JPMorgan Chase but is indicative of a larger shift in the banking industry. Texas recently surpassed New York in finance employment for the first time in 33 years, signaling a significant change in the landscape of the financial sector.
The Move to the Middle:
The rise of Texas as a banking center has been a gradual process that began after the terrorist attacks of September 11, 2001. Following the attacks, many financial institutions started relocating parts of their workforce to other states to cut costs and manage risks. While California briefly took over as the top state for finance employment between 2001 and 2006, both California and New York experienced a decline in employment due to the housing market crash and the 2008 financial crisis. New York eventually regained its position as the leading state for finance jobs, but Texas experienced a rapid acceleration in growth. Dallas, in particular, became an attractive destination for finance giants due to its lack of income tax, lower cost of living, ample building sites, and excellent transportation access.
Cost Savings and Quality of Life:
One of the main reasons financial institutions are moving more employees to Texas is the significant cost savings. Financial workers in Dallas earn 10% to 15% less than their counterparts in New York, with the pay gap narrowing for more senior positions. The lower cost of living in Texas, which is 55% lower than in Manhattan, also makes relocating to the state an attractive option for employees. While the pay may be lower, the argument is that the money goes much further in Texas. The cost savings are particularly pronounced for junior, clerical, or back-office positions. However, as positions become more senior, the cost of living difference becomes less significant.
From Bust to Boom:
Texas has experienced banking booms and busts in the past. In the 1970s and early 1980s, local lenders thrived alongside the oil and gas industry. However, Texas was hit hard during the savings and loan crisis of the 1990s, resulting in the closure of numerous banks. Despite these challenges, many of the largest banks in the United States are now rushing to establish new campuses or headquarters in Texas. Goldman Sachs, for example, plans to complete a new office campus north of downtown Dallas by the end of 2027. Bank of America and Wells Fargo are also expanding their presence in the state. Additionally, money managers such as Charles Schwab have moved their headquarters to Texas, attracted by the state’s business-friendly environment.
Operating in Texas:
While Texas offers numerous advantages for financial institutions, there are also challenges. The state government has made efforts to restrict the participation of certain banks in municipal bond offerings if they do not comply with local preferences. The Texas Attorney General is reviewing the anti-firearm policies of JPMorgan and Bank of America, as well as the environmental, social, and governance policies of other banks. Texas has a law in place that prohibits certain government contracts with companies that have anti-gun business practices. Despite these challenges, JPMorgan Chase’s CEO, Jamie Dimon, sees great potential in Texas but warns against the state becoming like Washington, D.C., which he believes makes it difficult for businesses to grow and expand.
Conclusion:
Texas has emerged as the new banking hub in the United States, surpassing New York in finance employment for the first time in over three decades. The growth of Texas as a banking center can be attributed to factors such as cost savings, a favorable business environment, and a lower cost of living. While New York City remains the top metropolitan area for finance workers, Dallas has secured the second spot. The shift in the banking industry reflects a broader trend of financial institutions diversifying their operations and seeking opportunities in new locations. As Texas continues to attract major banks and financial firms, it is poised to become an even more significant player in the finance sector.