How Employment Responds to Changes in Assets at US Banks and Credit Unions

While US credit unions have one of the highest market penetration rates in the world (more than 40 per cent), they have been rarely investigated by economists. In this study, we use new panel data to provide the first evidence of how US commercial banks and credit unions adjust their employment levels to output shocks. Monitoring by cooperative members leads us to expect that asset quality and growth will differ between coops and investor owned firms. The role of employee-members leads us to predict variation in employment adjustment when assets rise and fall. We find differing employment adjustment responses in reaction to growing versus shrinking assets and across types of firm. Some of our findings point to greater employment resiliency in credit unions. Our results complement findings from studies of workers cooperatives and firms with employee ownership and thus expand the range of alternative institutional arrangements for which evidence exists for greater employment resiliency compared to investor-owned firms (IOFs). Our findings, as does work by others suggest that credit unions and cooperatives were more resilient during the Great recession than IOFs and also point to the economic potential of credit unions and cooperatives compared to IOFs.