Layoffs at Wall Street banks and brokerage firms dropped for the second month in a row in December 2014, according to a private jobs report. New hiring, on the other hand, posted a meager gain in December following a surge the prior month as Wall Street firms continued to expand their payrolls to support higher M&A activity.
December Challenger, Gray & Christmas Report
According to the Challenger, Gray & Christmas monthly Job Cuts Report released last week, the financial services industry saw a 25% drop in planned layoffs from 657 layoffs announced in November to 490 layoffs announced in December. The December layoff total was 210% below the number of announced layoffs reported in the same month in 2013.
Throughout the year, Wall Street firms have announced 27,443 layoffs, 55% less than the 60,962 layoffs announced during 2013. It is important to note that the number of Wall Street layoffs in 2014 was the lowest annual total since 2010 when 23,996 layoffs were announced during the year.
Despite the decline in layoffs, financial services firms announced a meager 283 new jobs to be filled during December, a 94% drop from November’s 4,620 new jobs reported – which was one of the most robust new hiring totals seen in the past few years. On an annual basis Wall Street firms have announced plans to hire 7,632 new positions, 72% higher than the 4,011 new positions announced during 2013.
A Few Banks Shed Workers in December / Early January
In December, Deutsche Bank announced that it had cut or moved up to 10 London-based credit default swaps traders as the firm aims to trim its fixed income business to comply with new regulations. Another 3 to 5 swaps traders either had their positions eliminated or they were moved to other jobs as the bank eliminated at least 20 positions across its markets business.
Standard Chartered, the U.K. based, Asia-focused lender, announced last week that it plans to close its cash equities, equity research and equities capital markets business. The closing of these divisions, which have been unprofitable, will result in 200 jobs being cut, primarily in Asia. The move will save the bank $100 million, it said in a statement. In its retail bank, Standard Chartered have cut 2,000 staff in recent months, with plans to eliminated another 2,000 mostly Asia-based positions during 2015, mainly by not replacing departing staff.
Impact on the Research Industry
It is clear that the employment picture turned markedly better in 2014 with lower layoffs and an increase in hiring which was supported, in large part, by stronger M&A activity which offset weakness in cash equities and fixed income. If this trend continues, we would not be surprised to see investment banks increase hiring in their equity research departments as a way to compete for M&A deals.
However, we don’t think most sell-side firms will open the hiring floodgates in their research departments as weak equity commission volumes and increased regulatory pressures should prompt a cautious approach to hiring. For example, ESMA’s recent proposal to require buy-side firms to budget their third-party research spending could put downward pressure on payments for sell-side research – a development that will mitigate some of the interest in staffing up their research operations.
When all is said and done, we believe that the hiring outlook for research analysts, sales people, and other research support staff at sell-side and independent research firms should improve this year when compared to 2014. However, we don’t think the employment picture will be particularly robust in 2015.