Financial services layoffs rebounded modestly in February following a steep plunge the prior month as Wall Street executives remain nervous about weak market conditions.
February 2016 Challenger, Gray & Christmas Report
According to the February Challenger, Gray & Christmas Job Cuts Report released last week, the financial services industry saw planned layoffs edge up 0.8% to 1,006 layoffs from 998 layoffs announced in January. Despite this modest gain, the February 2016 layoff figure remained 44.1% below the 1,800 layoff total reported during the same month last year.
Over the first two months of the year, layoffs remain at an extremely low level of 2,004 layoffs – 72% below the total for the same period in 2015 and considerably below the level seen in the first two months of a year for quite some time. While it is still too early to tell whether this modest level of layoffs will continue in the months to come, the trend so far this year suggests that right sizing on Wall Street could be slowing.
As you can see from the above chart, layoffs on Wall Street have tended to slow during the spring in four of the past five years. This might lead us to expect that layoffs will remain low over the coming months. Unfortunately, what is also obvious from the above chart is that new hiring has remained extremely weak over the past few years suggesting that executives remain cautious about their staffing levels.
Wall Street Layoff Announcements
During February, Swiss banking giant Credit Suisse said that it would slash close to 4,000 jobs as it attempts to cut costs following a huge quarterly loss. The bank reported a net loss for the fourth quarter of 5.3 billion Swiss francs ($5.3 billion), compared to a net profit 691 million francs a year earlier. Tidjane Thiam, the bank’s CEO, said the job cuts would save the firm about 1.2 billion francs per year.
Last month, Wells Fargo announced that it would be laying off 156 employees from their mortgage operations at their Raleigh and Charlotte offices to better align with current market volumes. A spokeswoman for the company said that the layoffs were the result of market changes, including a decrease in foreclosure rates and only a small increase in the demand for mortgage financing.
Deutsche Bank announced that it is planning to cut 75 jobs in its global markets division, split between London and New York. The cuts are in the bank’s fixed-income trading unit. Like many other firms on Wall Street, Deutsche Bank is restructuring its FICC business to reflect the weakness in the bond markets. Recently Morgan Stanley cut 25% of its headcount in fixed income while Goldman Sachs said it would reduce its fixed income staff by 10% to address the “cyclical and secular pressures” in that business.
Our Take
The modest rebound in layoffs in February really doesn’t signal a change in the employment outlook on Wall Street as banks and brokerage firms continue to rationalize costs (particularly in their fixed-income departments) and they remain unwilling to aggressively staff up. As we have mentioned previously, weak equity and fixed-income commission revenue, a slowdown in IPO volume, and increased regulatory pressures continue to squeeze profits. This leads us to believe that firms won’t be hiring much in their research departments in the near-term, except to replace staff who leave for other firms.