How Much Finance Is Too Much for the US Economy?

During and immediately after the financial crisis of 2008, there was much talk and academic research about the rapid growth of the US financial sector over the preceding decades and whether that was good or bad. Since then, finance’s growth relative to the rest of the economy has slowed to a crawl, although its share of gross domestic product remains quite high by historical and international standards, and if this week’s earnings reports are any indication, it is on track to inch a little higher. So is that good or bad?

Value-added is how the US Bureau of Economic Analysis and statistics agencies in other countries measure an industry’s contribution to GDP. It’s the output of that industry minus the goods and services it buys or, expressed differently, profits plus employee compensation plus taxes. In 2025, the combined value-added of the finance and insurance industries was 7.9% of US GDP, just below the record of 8% set in the Covid-19 pandemic year of 2020 — albeit not all that much higher than the 7.6% share recorded in 2001 and 2006.