Wall Street layoffs surged during July, while new hiring plunged erasing much of the rosy picture seen last month. However, when viewed over the past few years, the July deterioration doesn’t look so bad. So should industry participants feel optimistic or pessimistic about the job outlook?
July 2015 Challenger, Gray & Christmas Report
According to the Challenger, Gray & Christmas monthly Job Cuts Report released last week, the financial services industry saw planned layoffs surge more than 90% from 1,624 layoffs announced in June to 3,107 layoffs announced in July. The July 2015 layoff figure represents a 97% increase from the 1,580 layoffs reported during July of last year. The one piece of good news in this month’s report is the fact that over the first seven months of 2015, layoffs at financial services firms are 15% lower than the total seen over the same period last year.
New hiring in July was also disappointing as financial services firms announced only 516 new jobs were available, following a modest figure of 820 new jobs in June. Over the first seven months of this year, new hiring on Wall Street has totaled 4,861 jobs – up over 118% from the 2,229 new jobs announced during the same period in 2014.
While it is clear that July was not a great month for employment on Wall Street, a careful review of the chart above shows that layoffs have typically increased during the month. In fact, in July 2011 Wall Street layoffs surged 840%, in July 2012 they rose 111%, in July 2013 they increased 25%, in July 2014 they posted a 76% gain, and then we saw a 91% rise this year. So, the July rise in layoffs is clearly a seasonal trend rather than an indication of a fundamental worsening.
However, a slightly more troubling trend is with new hiring. The decline in new hiring seen in July of this year was the first time new hiring dipped during a July since 2011. It is also important to note that new hiring remains at extremely anemic levels as executives remain reticent to build up their staffing levels in the wake of the financial crisis.
Wall Street Layoff Announcements
After ousting CEO Antony Jenkins, Barclays PLC’s new Chairman John “Mack the Knife” McFarlane has indicated that he plans to implement a more aggressive program to right size the bank in an effort to address the firm’s chronic under-performance.
According to senior sources at the bank, Barclays is planning to cut as many as 30,000 staff, or a quarter of its global workforce by the end of 2017. While there is no specific plan in place at the moment, Wall Street analysts suggest that the most likely area for Barclay’s proposed job cuts would be middle and back office operations, as well as the bank’s retail branch network which could benefit from automation programs.
The suggested reductions would be in line with job cuts seen at Royal Bank of Scotland which cut headcount from 184,500 in 2008 to 89,700 at the end of last year, while Lloyds Banking Group reduced staff from 132,000 to 95,088 over the same period.
In addition to the Barclay’s news, Wells Fargo said it is cutting 125 jobs nationwide, with the bulk of these (91) coming from its Charlotte, South Carolina-area mortgage operation. Many say this is the latest sign that U.S. lenders have not finished slashing staffs in their mortgage units as foreclosures continue to decline and higher interest rates shrink consumer demand to refinance home loans.
Our Take
Although the Wall Street jobs picture in July erased most of the gains seen the prior month, this doesn’t change Integrity’s overall outlook for employment in the research industry. Weak mortgage and IPO business across the industry has offset stronger trading revenue. In addition, European regulatory uncertainty regarding the continued use of commissions to pay for research has made most research executives nervous.
Consequently, we suspect most investment banks and independent research firms will continue to be conservative in managing their staffs throughout the remainder of 2015. Of course, some firms could use the uncertainty in the industry to pick up high quality research analysts and salespeople if they feel that some of their competitors have begun questioning their commitment to the research business.