Despite the healthy January non-farm payroll report released last week, the jobs picture on Wall Street worsened significantly. Layoffs at Wall Street banks and brokerage firms surged during the first month of 2015 while new hiring posted a meager gain in January following a slightly larger increase in December. The poor January jobs picture reflects that Wall Street firms are trying to right size their businesses given lower trading and commodities revenues and increased currency risks.
January 2015 Challenger, Gray & Christmas Report
According to the Challenger, Gray & Christmas monthly Job Cuts Report released last week, the financial services industry saw a tenfold surge in planned layoffs from 490 layoffs announced in December to 5,375 layoffs announced in January. The January layoff total was the largest monthly layoff figure reported since February 2014 and was 12% higher than the number of announced layoffs reported in January of 2014.
The weakness seen in layoffs was also seen in new hiring. During January, financial services firms announced a meager 200 new jobs to be filled, a 29% drop from December’s modest 283 new jobs reported.
The January Challenger Gray & Christmas report is consistent with business prospects revealed by many banks in their Fourth Quarter earnings calls, stemming in large part from lower fixed income trading and commodities revenues, to increased currency risks, and lower long-term interest rates.
Specific Bank Layoff Announcements
Last month, JPMorgan Chase & Co. said it plans to cut more than 350 jobs later this year in the Rochester, New York area. JPMorgan employs close to 1,500 in the Greater Rochester area. The bank has notified local employees about the job eliminations in late summer or early fall from its mortgage banking operations. The cuts are due to a decrease in mortgage modification work, as well as mortgage refinancing in general, according to a JPMorgan spokesperson.
In January, Canadian bank CIBC also announced that it is laying off more than 500 employees. The Toronto-based bank confirmed that it is reducing staff across the organization, but it did not specify the total number of layoffs it might implement. “These reductions reflect an overall alignment of our resources that allows us to better serve our clients and ensure that we are operating efficiently,” a spokesperson said.
Even though the 4th Quarter was weak for many Wall Street banks, there are some signs that conditions are improving as we enter 2015. Executives at Goldman Sachs, Citigroup and Credit Suisse have all recently commented that trading activity picked up in January as investors are taking on new positions or hedging bets on everything from the direction of interest rates to energy prices.
At the Credit Suisse Financial Services Conference in Miami, Lloyd Blankfein, Goldman Sachs chairman and chief executive noted that events in the Middle East and Russia, a recent selloff in oil prices, and developing interest-rate policies around the world as helping to draw many investors back to the markets. “That creates the need for people to again look at what their portfolios are, compare their expectations about the future, modify their positions, and then increases our role as an intermediary.”
Impact on the Research Industry
So, what does this mean for hiring in the research industry? Clearly, some of this will depend on whether trading continues to improve throughout the rest of the year. A better trading environment could boost banks’ willingness to add staff to their research departments.
However, we doubt that sell-side firms will become aggressive in restaffing depleted research departments due to increased regulatory pressures. In our minds, one of the biggest unresolved issues for most research management is what ESMA decides to do with its MIFID II proposal regarding the use of client commissions to pay for external research.
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 could improve this year when compared to 2014. However, we don’t think that research hiring at Wall Street firms will be particularly robust in 2015.