Wall Street firms experienced a modestly improved jobs picture in May as fewer layoffs were announced due to a slowdown in the recent rightsizing trend among investment banks. However, this does not portend a rosy outlook for the financial services industry since banks remain cautious about bringing on new staff.
May Challenger, Gray & Christmas Report
According to Challenger, Gray & Christmas’ monthly Job Cuts Report released last week, the financial services industry announced a drop in planned layoffs during May of 1,151 jobs. This is a 72% decrease from the 4,124 planned job cuts announced in April. However, the number of planned job cuts last month remains 390% higher than the number of layoffs announced in May of 2013.
Another piece of evidence that the jobs picture is improving on Wall Street is the fact that financial services firms have announced 41% fewer layoffs on a year-to-date basis — 20,581 layoffs so far this year compared to 35,091 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.
Despite this improvement, planned hiring at financial services firms fell 100% in May as no new hiring was announced during the month from 350 new jobs announced in April. In addition, the number of new May hiring plans represents a 100% drop from the meager 69 new jobs announced in May of the prior year. This weakness is borne out by the fact that year-to-date hiring plans in the financial services industry remain weak as 54% fewer new jobs have been announced so far in 2014 when compared to the same period in 2013.
Major Industry Moves
As we warned last month, Barclays Plc’s eventually announced that it plans to slash 7,000 jobs at its investment bank between now and 2016, signaling that its effort to build a global bank has come to an end. This is in addition to the 12,000 job cuts that the lender announced it would make in February of this year.
In May, the Royal Bank of Scotland PLC announced that it would slim down its trading operations at its Stamford CT headquarters, cutting costs and refocusing its business on its home UK market. RBS is planning to shed 400 jobs across its US business over the next 18 months in order to prepare for new banking regulations which are expected to go into effect over the next year.
Although no job cuts have yet been announced, a number of bank analysts have warned that JP Morgan Chase, which currently employs over 250,000 worldwide, could announce massive layoffs in the next few months due to increased regulatory pressure and a squeeze on bank profits. Some suggest that CEO Jamie Dimon could announce a new round of layoffs totaling as many as 10,000 jobs. These analysts also surmise that Dimon may decide to throw in the towel given the extensive regulatory oversight that the industry is facing, and that JP Morgan has had to deal with in the past year.
Bullish Developments for Industry Employment
Despite the negative impact of new regulations, a few developments should be seen to be constructive for Wall Street’s near-term employment outlook.
Globally, business conditions continue to improve and corporations are holding significant cash reserves so M&A activity is likely to continue to increase, supporting increased staffing at investment banking departments. In addition, the regulatory changes which are pressuring banks, have also boosted the hiring of compliance and risk management professionals by banks, broker-dealers, and hedge funds.
Relevance for the Research Industry
While improving, the employment outlook on Wall Street is nothing to get excited about – at least not for the research industry. Improvements seen in firms’ cash equities business earlier this year, and a pickup in M&A activity should support existing research staffs.
However, despite a rising equity market, trading volumes were extremely weak in May. A continuation of this slowdown, on top of the regulatory pressures that banks are facing, could keep a lid on new hiring of analysts or research sales staff.
As a result, we remain cautiously optimistic about the employment outlook in the research industry. Unfortunately, the fundamentals of the market don’t look like they will support a robust pickup in hiring anytime soon.