For the second consecutive month, layoffs on Wall Street plunged in August, falling to the lowest level seen in years. However, hiring on Wall Street also dipped in August signaling that the jobs outlook continues to be weak as bank executives remain nervous about low interest rates, weak commission revenue, tepid IPO volume, and growing regulatory pressures.
August 2016 Challenger, Gray & Christmas Report
According to the Challenger, Gray & Christmas Job Cuts Report, the financial services industry saw planned layoffs plummet 75% in August to 381 layoffs from 1,524 layoffs announced the previous month. This decline put the August layoff total at the lowest level seen since May 2013. The August 2016 layoff figure dropped to a level 17% lower than the 461 layoffs reported during the same month last year. Layoffs for the first eight months of 2016 totaled 17,707 or 11.7% below the total for the same period in 2015.
New hiring, however, weakened slightly in August as it dipped 8% to 861 new positions after surging in July. New hiring in August was 56% below than the figure seen in the same month in 2015 when 1,975 jobs were available. Over the first eight months of 2016, new hiring totaled 2,876 new jobs — 58% below the 6,836 new jobs offered during the same period during 2015.
As you can see from the above chart, new hiring actually eclipsed layoffs during August reflecting that Wall Street employment actually grew on a net basis during the month. However, this has been extremely rare, occurring only five times over the past twenty four months. In fact, since September 2014, net employment on Wall Street has actually contracted by 31,009 jobs as layoffs have outpaced new hiring. This trend is consistent with our view that Wall Street executives are continuing to shrink their staffs as overall profits remain under pressure.
Wall Street Layoff Announcements
During August, billionaire investor Paul Tudor Jones dismissed about 15% of his workforce or approximately 60 staffers at Tudor Investment Corp, after losses and investor withdrawals at the $11 billion hedge fund. The layoffs included positions ranging from money managers to support staff.
A management statement about these layoffs explained, “Amid a changing operating environment, we have made strategic adjustments to our firm’s staffing. These difficult changes were made after conducting a deep and broad review of our business and are meant to optimally size the firm for future success. We are committed to treating our departing employees with care and support and appreciate their many contributions to Tudor.”
Also in August, Bank of America slashed approximately 30 technology and operations positions in its Charlotte location due to continued cost-cutting at the company. Most of the staff affected were employed in BofA’s global banking and markets units. A bank spokesman noted the cuts are part of ongoing efficiency efforts at the Charlotte-based company as part of the firm’s Simplify and Improve initiative. “These notifications have been ongoing and reflect our previously announced efforts to simplify our company for our customers and clients.”
Our Take
The plunge in layoffs in August could be seen by some as evidence that the Wall Street employment outlook is finally turning around. However, we aren’t so optimistic. The continued weakness in new hiring reveals management concerns about the difficult market conditions, including low interest rates, weak fixed-income and equity commission revenues, weak IPO volume, and increased regulatory changes – all factors which have squeezed bank profits so far in 2016. This leads us to conclusion that investment banks and independent research firms probably won’t be beefing up their analytical teams or research sales operations in any significant way in the near future.