Wall Street Layoffs Continue to Shrink While Hiring Stalls in September

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Layoffs at Wall Street investment banks and brokerage firms fell in September to the lowest level seen in more than one year, according to a recent private jobs report.  However, the September layoff data doesn’t reflect a strengthening Wall Street employment outlook as new hiring during the month also remained extremely weak due to low market volatility, anemic trading volumes, and pending regulatory changes.

September Challenger, Gray & Christmas Report

According to the Challenger, Gray & Christmas monthly Job Cuts Report released recently, the financial services industry experienced a 39% drop in planned layoffs in the past month from 974 layoffs announced in August to 591 layoffs announced in September.  The decline in planned layoffs in September was also 91% lower than the number of layoffs announced in September 2013.

On a year-to-date basis, Wall Street firms have announced 24,623 layoffs during the first three quarters of 2014, 50% less than the 48,874 layoffs announced during the same period in 2013.  The decline in announced layoffs is a clear signal that the employment outlook is improving modestly.

However, we don’t see this data as evidence that the Wall Street employment picture has become robust.  Financial services firms failed to announce any new hiring during September from a feeble total of 500 new positions announced in August.  This drop in planned hiring is consistent with year-to-date hiring plans at Wall Street firms which are 29% lower so far in 2014 when compared to the same period in 2013.

Fragile Market Conditions Continue

Despite the drop in announced layoffs in September, we expect Wall Street firms will continue to shed workers in the coming months.  Last month, two top trading executives at Bank America Corp., David Moore and David Hartney, left the bank as rumors suggest the firm is preparing to shed positions in the fixed-income and equities divisions on a worldwide basis.

Bank of America is not the lone Wall Street firm making such plans as record low market volatility, weak trading volumes, and concerns over pending regulations contributed to the worst first half in trading since the financial crisis.  In fact, JPMorgan Chase’s CFO Marianne Lake, recently argued at an investor presentation that low volatility and weak customer demand might continue to be the market norm through at least mid-2015.

Britain’s Lloyd’s Bank, is expected to imminently announce the elimination of thousands of jobs in what may be the biggest round of cuts since 2011, a person familiar with the matter said.  The bank will shut branches as part of efforts to automate its entire business, with job cuts expected in areas such as mortgage processing and new account opening.

Barclays PLC is also expected to announce significant job cuts in the coming weeks.  A person with knowledge of the matter suggests that the bank plans to cut 3,800 jobs in 2014 at its consumer and business banking division.  Close to 1,300 positions have already been eliminated in this division, the person acknowledged.

Impact for the Research Industry

In our view, sluggish equity commission revenue cannot bode well for a pickup in research industry hiring.  Combine this factor with the uncertainty caused by recent FCA and ESMA pronouncements about a possible ban in using client commissions to pay for research leads us to believe that very few investment banks or independent research firms (particularly those with significant European business) will ramp up hiring in their research departments until business conditions markedly improve.

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