While most experts believe that job opportunities on Wall Street are likely to increase in 2014, they also agree that the financial services employment outlook is unlikely to approach the go-go environment seen before the financial crisis any time soon.
Outlook Improves A Bit
According to Glassdoor, an online career and jobs site, 41% of current employees working in the finance industry believe their company’s business outlook will get better in the next six months (average for all industries). This compares to 22% of financial industry workers who believe business conditions at their employers would worsen in 2014.
Two types of firms likely to be staffing up this year include private equity and asset management firms as Wall Street veterans set up their own shops. Unfortunately, most of these firms are small in comparison to Wall Street’s investment banks which are faced with conflicting trends which could keep a lid on hiring at these firms.
Some experts suggest that another bright spot for hiring this year could be the Mergers and Acquisition groups at both large and boutique investment banks. Sanford Bernstein projects that mergers and acquisitions will rise by 7% in 2014, led by corporate tie-ups in the health care, financial services and technology industries.
Another area where banks are expected to be hiring this year are in the compliance and risk management departments as increased government regulation forces investment banks to beef up these capabilities.
John Challenger, CEO of global outplacement firm Challenger, Gray & Christmas explains this trend at Wall Street banks, “Because of the regulations, they are adding to audit, risk control and risk management, and on the financial reporting side. Today, they are so scrutinized and there are so many regulations that they have to adhere to, the financial services need mass staffs to comply with all that.”
Some Trends Keep A Lid On Hiring
Of course, increased government regulations like the Volker Rule or increased capital requirements for banks are forcing Wall Street firms to limit their risk taking – a move that will hinder growth and resulting hiring plans.
For example, one area which is unlike to see much hiring in the near-term are investment bank’s fixed-income, currency and commodities trading divisions — an area where most big banks made a lot of their profits during the housing-bubble years. This area of the bank will be most negatively impacted by the Volcker Rule which goes into full effect in 2015. Well-known Sanford Bernstein financial services analyst, Brad Hintz acknowledges that “fixed-income remains the problem child,” for most investment banks.
As we have mentioned many times in the past, equity commissions have not really bounced back in the past few years, even though the stock market has rebounded strongly. Clearly, a continuation of this trend would hamper hiring plans in the equities divisions of most banks.
In addition, many Wall Street firms continue to feel the pressure to cut expenses as weakness in mortgage applications has hampered a major money maker for these banks as interest rates creep higher.
Employment Remains Below Peak Levels
Despite the modest pick-up in hiring that is expected in 2014, few anticipate that Wall Street employment will eclipse the peak levels seen pre-crisis. For example, only about a quarter of the more than 30,000 securities-industry jobs that disappeared from New York after the financial crisis have returned as many firms moved certain roles to lower cost centers in the South or Western US.
Of course, the real driver of Wall Street employment and compensation in 2014 will be the profitability of the industry as it tries to deal with regulatory changes, rising interest rates, and potential legal costs stemming from the financial crisis.
As long as these headwinds remain, most expect that hiring on Wall Street is likely to remain restrained as managers await clear signs of improved business conditions before significantly adding to their payrolls.