Layoffs on Wall Street dipped in August to the lowest monthly level recorded in more than ten years, while new hiring surged to the highest level seen since January 2018. The strong August jobs outlook suggests that bank executives may be becoming less concerned about earnings as the US economy continues to rebound from shutdowns brought on by the COVID-19 pandemic.
August 2020 Challenger, Gray & Christmas Report
According to the August Challenger, Gray & Christmas monthly Job Cuts Report released last week, the financial services industry saw planned layoffs plunge 97% to 45 layoffs in August from 1,334 layoffs recorded during the prior month. The August layoff figure represents a 98% drop from the 2,638 layoffs reported during the same month last year. Over the first eight months of 2020, 9,100 layoffs have been recorded, 49% lower than the 17,726 layoffs seen during the same period of last year.
New hiring in August improved significantly as financial services firms announced that 6,118 new jobs were available, sharply higher than the 409 new jobs recorded during July. The August hiring total was also considerably higher than the 0 new jobs available during the same month of last year. Over the first eight months of 2020, new hiring totaled 8,297 new jobs – 311% higher than the 2,020 new jobs on offer during the same period last year.
As you can see from the above chart, monthly layoffs actually fell below new hiring in August – a trend that has caused overall employment levels to grow on Wall Street this past month. Over the past forty-eight months hiring has outstripped layoffs only six times – in March and May of 2017; in January and December of 2018; and in March and August of 2020. Could this data be a signal that the overall employment outlook on Wall Street is finally turning around? It is still too early to say.
Specific Layoff Announcements
During August, HSBC announced that it would likely accelerate a sweeping restructuring program that it first announced in February due to the impact of the coronavirus pandemic on business. As a result of these pressures, the bank announced that pre-tax profits for the bank had plunged 65% during the first half of 2020. Management initially said it would slash 35,000 jobs as part of its restructuring.
Wells Fargo, under pressure to lower costs, ended its moratorium on terminations during August in a move contrary to many of its peers. Consequently, the bank is looking to thin management ranks, remove underperformers and pare expenses. Although a bank spokesperson recently said that Wells Fargo expects to “reduce the size of our workforce through a combination of attrition, the elimination of open roles and job displacements”, she was vague about the specific size of the planned layoffs. Pressure on Wells Fargo to lower costs grew all the more acute this year as it reported its first quarterly loss in more than a decade and slashed its dividend by 80%.
Our Take
Layoffs on Wall Street plunged sharply while hiring rose significantly during August. While it is clear that the August jobs data is bullish, it would be premature to conclude that financial services executives have become more confident in their profit outlook – particularly given historically low interest rates, huge loan loss reserves, and the uncertainty surrounding the overall business climate given the COVID-19 pandemic.
Despite these pressures, one key factor which could spur a pickup in research hiring at sell-side and independent research firms is the fact that buy-side research engagements with many research providers has surged during the COVID-19 pandemic. The increased buy-side demand for external research inputs could prompt asset managers to pay more for external research – a factor that might boost sell-side and independent research firms to expand hiring of analysts and research salespeople to support their clients.