Layoffs in the financial services industry surged in April as Wall Street firms continued to slash jobs last month due to weakness in mortgage applications and overall rightsizing at many of the nation’s largest banks. However, the data shows some signs of improvement signaling that the employment picture may be turning around in the financial services industry.
April Challenger, Gray & Christmas Report
According to Challenger, Gray & Christmas’ monthly Job Cuts Report released last week, the financial services industry announced a surge in planned layoffs during April with plans to cut 4,124 jobs in the coming months. This is a 490% increase from the 698 planned job cuts announced in March, and is an almost 300% gain from the number of layoffs announced in April of 2013.
Despite the surge in announced April layoffs, Wall Street firms have announced 19,430 planned layoffs on a year-to-date basis – a 44% decline in the number of layoffs announced during the same period in the previous year. This suggests that the pace of right sizing in the financial services industry might finally be turning around.
John Challenger, CEO of Challenger, Gray & Christmas explained this development, “We are seeing some stabilization in the banking industry. We may continue to see cutbacks in the mortgage departments, as banks shed the extra workers hired to handle the flood of foreclosures, but those areas are getting back to normal staffing levels.”
Planned hiring at financial services firms rose 133% in April to 350 jobs from a modest 150 new jobs announced in March. In addition, the number of new April hiring plans represents a 600% gain from the level seen in April of the prior year. However, it is important to note that year-to-date hiring in the financial services industry remains anemic as it is 53% below the levels seen during the same period in 2013.
Major Industry Moves
The one major financial services firms which announced layoffs in April was Citigroup which announced that it was cutting 200 to 300 jobs (2% of it staff) in its global markets business. The primary reason for this reduction was a response to a slump in profits due to losses in its bond trading unit.
Another major evolving story on Wall Street layoff front is Barclays Plc’s planned revamp of its investment bank that is expected to be presented to shareholders on May 8, and which executives have said will include significant job cuts. Analysts at Sanford C. Bernstein estimate that Barclays Plc could eliminate 7,500 jobs at its investment bank to improve returns at its securities unit. Bernstein analysts note that the European fixed-income, currencies and commodities business may be the hardest hit, with about 5,000 job losses. Cuts of 6,500 to 7,500 would represent a reduction of between 25% to 30% of the unit’s employees.
Positives for Equity Research
As we have written recently, the outlook for Wall Street’s equities businesses has become more upbeat in the past few months. For example, Bank of America, Morgan Stanley, Credit Suisse, and JP Morgan have all recently reported growth in their equities revenues (http://www.integrity-research.com/cms/2014/04/23/upbeat-equities-environment/).
In addition, institutional investors received $431 bln in new equity mandates in 2013 with a significant portion of these asset inflows going into international equities. Another report shows that as of March 31st, hedge fund assets have hit new highs of $2.7 trillion thanks to healthy net capital inflows http://www.integrity-research.com/cms/2014/04/30/more-positives-for-equity-research/).
Relevance for the Research Industry
Despite the surge in layoffs in April, it looks like most Wall Street firms are starting to achieve more stable employment levels, eliminating the need for large layoffs in the near future. In addition, a number of developments are starting to suggest that the sell-side and buy-side equities businesses are starting to turn around.
Consequently, we are becoming more constructive about the employment outlook for research analysts, research sales people, and other research support staff at investment banks and buy-side firms. In addition, we suspect that a future increase in research staffing levels at sell-side and buy-side firms will also create higher demand for alternative research, unique datasets, and other analytic inputs – a virtuous cycle that has been evident in the past. Certainly, this would be great news for an industry that has been buffeted over the past few years.