Editor’s Notes, February 13, 2012
by Beth Connolly on February 13, 2012
Opinions vary about what is behind the flurry of layoffs and bonus cuts on the Street in the past month and a half. What we do know is that almost every major bank has announced one or more of the following:
A) Bonus Pool Reduced
B) Cash Payout of Bonuses Capped (the remainder paid in deferred stock)
C) Layoffs, sometimes comprising the disbanding of an entire unit
D) Hiring Freezes
E) Promotion Freezes
F) Salary Clawbacks
Here at the Wall Street Job Report, we’ve been discussing this issue for a number of weeks. The fact is that even as a highly qualified professional with years of experience, it can be exceedingly difficult to get a job on Wall Street in this climate.
Jack Kelly gives his opinion on the subject today. It appears that the weak hiring market is Wall Street’s overreaction to external stresses on the industry, like the crisis in Europe and regulatory crackdowns.
Readers, what do you think is truly behind the downturn? And will jobs and compensation come back?
Thanks for reading and as always, e-mail me with any comments, complaints, or suggestions.
Your Editor,
Beth Connolly
Beth@WallStreetJobMarket.com
2 comments
Hi Beth,
I agree: Wall Street has historically responded immediately and vigorously to market conditions. However, in past cycles, the appetite to hire among 2nd and 3rd tier institutions has been robust enough to more than offset the waves of downsized employees. Yes, the crisis in Europe and regulatory matters have been paralyzing but you also need to recognize that the industry is in the midst of rapid and dramatic change and redefinition…in large part driven by advancements in technology. These changes are inevitable and should have been anticipated. At some point, lines of business and companies must respond or they become irrelevant.
Happy to chat further. Wondering if you are aware of my book – The Wall Street Professional’s Survival Guide? If not, you should be.
Best,
Roy Cohen
by Roy Cohen on February 13, 2012 at 5:57 pm. #
I think that the investment industry is bloated. Its employment structure has changed in response to regulation changes, but that same structure has not yet reflected the changes to reflect adequately the grownig automation that is taking over the industry. In the days before Bloomberg machines a small boutique firm might have had two or three traders and several assistants to serve a sales force of 100 to 150 people. Bloomberg came, but the trading desk numbers didn’t really decline. Automation (read that as programmers) had until fairly recently focused on things like execution, straight through processing, accounting, and the like. In the past couple of years, however, programmers and software vendors at the behest of Wall Street management has begun to focus on investment choices, i.e. the stuff that licensed professionals have traditionally done.
Computerized security selection/execution has several advantages over the human being. First, it always follows the rules, thus allowing one of the activities assigned to risk management to be scaled down and thus reducing legal and financial exposure. Second, once a program has been written, it doesn’t need to be paid for again and again. It doesn’t get sick, doesn’t ask for days off, doesn’t take a vacation, and doesn’t have an attitude. It doesn’t require the employer to pay it a year end bonus or to give it a corner office. In short, a computer is cheaper than a person by a long shot. Third, many computers can be crammed into a dark, stuffy room without raising a complaint. In the space allowed for 20 traders, 500 computers could reside quite comfortably and unlike their human counterparts, they are happy to work 24/7 without demanding breaks or a lunch hour.
What is happening to the ranks of Wall Street professionals is occurring a bit more slowly than what has happened in much of the rest of America. Management is cautious about implementing full scale automation because it perhaps doesn’t believe that it is really possible quite yet to push out 90% of its staff and replace them with machines or perhaps it doesn’t want to start a war with its staff in advance of ominous moves to come. Whatever the reason, the world of finance is changing, and the current malaise in the financial world is allowing companies that have laid off traders, sales people, and back office staff to divert funds to speeding up the automation process. The proof of this requires only looking at the unemployment figures for 2011. While the country’s unemployment rate hovered at 9.5%, the unemployment rate among IT workers was a mere 3%! It demonstrates where the money in the economy has been flowing.
This is not altogether unexpected. Businesses on the whole have labored for the past three years under the hand of a government that cannot lead. Regulation and tax policies seem to lack consistency and predictability. Healthcare legislation is a great example. The scope of the voted changes was massive, and the potential impact on the country is projected to be perhaps the largest single change in the past 100 years. It would negatively impact most small businesses, and if the statistics are right, it would discourage hiring, thus propelling the country back toward another recession. So, if a company, whether on Wall Street or not, hires someone today and regulations change, it could be put into the position of finding that hiring was the wrong thing to do and that it has to pay out higher insurance premiums to offset the unemployment claims against its account in the wake of new layoffs. The end result is that a prudent company will simply hold off until the government decides what it will be doing on a consistent basis for the next several years. Under the present conditions in Congress, consistency is nearly a banished word.
So, if I were a laid off investment banking employee, a trader, a securities salesman, or a back office employee, I think I would give serious consideration to Plan B for my life.
by Robert DeFazio on February 13, 2012 at 8:22 pm. #