Layoffs at Wall Street investment banks and brokerage surged in October to the highest level seen since April, 2014, according to a recent private jobs report. In addition to the pickup in layoffs, new hiring during October also stalled as Wall Street firms refuse to expand their payrolls in an environment where equity commission volumes remain weak, interest rates are edging higher, and regulatory changes are looming on the horizon.
October Challenger, Gray & Christmas Report
According to the Challenger, Gray & Christmas monthly Job Cuts Report released recently, the financial services industry saw a 183% surge in planned layoffs from 591 layoffs announced in September to 1,673 layoffs announced in October. The only good news in October was the fact that this year’s level of announced layoffs was 80% lower than the number of layoffs announced in October of the previous year.
On a year-to-date basis, Wall Street firms have announced 26,296 layoffs during the first ten months of 2014, 54% less than the 57,591 layoffs announced during the same period in 2013. The decline in announced layoffs on a year-to-date basis is a signal that the employment outlook is on the mend – albeit only modestly.
However, no one should take this data as evidence that the Wall Street employment picture is rosy. For the second consecutive month, financial services firms failed to announce any new hiring during October. This marks the fourth month this year where no new hiring has been announced – a clear sign of caution on the part of Wall Street executives. On a year-to-date basis Wall Street firms have announced plans to hire 2,729 new positions, 32% lower than the 4,011 new positions announced during the first ten months of 2013.
Banks Shed Workers to Hit Profit Targets
As we have mentioned in the past, the Wall Street employment picture, while getting better is not indicative of an industry on the upswing. In fact, we expect many investment banks will continue to shed workers and keep a lid on new hiring through the end of the year in an effort to hit their profit targets.
Last month Citibank announced plans to lay off 370 employees in the company’s consumer banking business in the Des Moines area by the middle of next year. Management explained that this decision came from “ongoing efforts” to increase efficiency of its operations.
In addition, Bank of America announced that it was planning to lay off over 260 employees in Addison and Plano Texas. Some of these employees worked at BofA’s Legacy Asset Servicing unit. Since mid-2013, the bank has laid off more than 900 workers in the region.
Impact for the Research Industry
Given these conditions, we very much doubt that either Wall Street investment banks or independent research firms will alter their cautious approach toward hiring staff in their research departments over the coming few months. Not only are public companies looking to meet year-end profit targets, but many sell-side and independent research providers are nervous about the impact that the recent FCA and ESMA announcements about eliminating the use of client commissions to pay for corporate access, and the possible ban in using commissions to pay for any investment research might have on their businesses.