New York, NY – According to global outplacement consultancy Challenger, Gray & Christmas, Inc. planned job cuts by U.S.-based financial services companies fell 15 percent in October to continue the moderating trend in layoffs seen over the past three months. However, this data does not reflect UBS’ recent announcement to cut 10,000 positions globally at the Swiss-based investment bank – a sign that employment conditions in the financial services industry remain weak.
Rosy October CGC Report
Based on the most recent Challenger, Gray & Christmas report, announced layoffs for U.S. based financial services firms during the month of October totaled 718 – 15% less than the 845 layoffs announced in the prior month. However, the October figure was over 40% higher than the level reported in the same month in the prior year.
October marked the third straight month that the number of layoffs at U.S. based financial services institutions totaled less than 1,000 – a clear sign that the employment conditions are improving at U.S. based financial services companies.
Another piece of data which corroborates this conclusion is the announced hiring plans in the industry. The October report shows that U.S. based financial services firms plan to hire 1,950 new employees – a total that is both better than the prior month total as well as the figure seen during the same month of the previous year.
In addition, financial services layoffs for the year continue to run well below last year’s pace. Through 10 months, employers announced 28,450 job cuts, 48 percent fewer than the 54,510 cuts announced between January and October 2011.
Hiring plans for the January through October period also reveal a slowly improving employment market. For this period in 2012, hiring plans are 65 percent better than they were for the first ten months of 2011.
Unfortunately, this improvement masks underlying weakness as the number of net jobs at financial services companies continues to decline. Over the first ten months of this year, the number of net positions at U.S based financial services institutions has actually fallen 17,499 as the number of announced layoffs has outstripped hiring plans.
Spooky UBS Announcement
In a pre-Halloween announcement last week, Zurich-based investment bank UBS announced that it plans to eliminate up to 10,000 jobs globally and cut costs in a major move that will reduce its earnings in the short term.
UBS management explains the move as a way to fulfill its promise to reduce its riskier operations and focus on its profitable wealth management group. The cost reductions will also help the bank address the hit to its profitability caused by the sovereign debt crisis, a sluggish European economy, and a slew of recent scandals.
UBS said it plans to eliminate most of its fixed-income businesses because they had become unprofitable. The smaller investment banking unit would focus on advisory services, research, equities, foreign exchange and precious metals.
UBS’ planned layoffs are expected to be most pronounced in London, with 45 percent of the layoffs, or 4,500 people coming from that center; 2,500 job losses would come from its Swiss operations; and the remaining 3,000 layoffs would be seen in the United States. Job cuts have already begun. Last Tuesday, UBS began to tell some employees that their positions were being eliminated.
Some analysts believe that UBS’s announcement might kick off a wave of similar moves by its competitors who might also be forced to reduce their investment banking operations in response to stricter capital requirements and increased government regulation. This could have an extremely bearish impact on the employment market in the financial services industry.
The conflicting announcements last week from Challenger, Gray & Christmas and UBS suggest that while employment conditions in the financial services industry are improving, they remain extremely fragile and are not likely to approach healthy levels anytime in the near future.
The big question is whether any of UBS’ competitors will follow its lead to scale back their investment banking operations given the stricter regulatory environment and general weak conditions of the financial markets. If they choose to follow suit, we are likely to see an extremely difficult employment outlook in the financial services industry for the foreseeable future.