More Blood on The Street

Chances are good that big securities firms and investment banks still have lots of job-cutting to do

Can it get any worse on Wall Street? Brokerages have made deeper job cuts this year than ever before. Yet some experts predict more carnage is yet to come.

When the stock market crashed in 1987, securities firms axed 8.8% of their workforce -- about 40,000 jobs -- according to the U.S. Labor Dept. But Wall Street firms ramped up hiring during the 1990s and were still adding even as the high-tech bubble burst in the spring of 2000.

Since then, the securities industry has shrunk payrolls by 75,000, or 9.5%. But these firms still may have a long way to go if business doesn't pick up (see BW Online, 10/25/02, "A Lost Generation of Job Seekers?").

SURPRISINGLY MODEST.

  The illustrates why. In aggregate, major firms have chopped 10.2% of their jobs. Yet a great disparity exists between the outfits. While retail brokerages like Merrill Lynch (MER ) and Charles Schwab (SCH ) have aggressively slashed their head count, investment banks such as Morgan Stanley, Lehman, Bear Stearns (BSC ), and JP Morgan Chase have been making surprisingly modest cuts.

That's about to change. Veteran Wall Street compensation consultant Alan Johnson of Johnson Associates expects investment banks to shrink their payrolls by an additional 5% this year as they lay off more senior-level people than they have to date.

Already, JP Morgan Chase has announced that it expects to cut 2,200 jobs in its investment bank. By next spring, the industry will face a "day of reckoning," Johnson predicts. Until now, investment banks have assumed "they will be running the same size factory, but more efficiently," he says. If the markets don't rebound, firms will have to make strategic decisions and perhaps get out of certain businesses.

Headcount Reductions

COMPANY NAME 1Q 2000 2Q 2000 3Q 2000 4Q 2000 1Q 2001 2Q 2001 3Q 2001 4Q 2001 1Q 2002 2Q 2002 3Q 2002 % change from peak
JP Morgan n/a n/a n/a 99,757 98,518 97,224 96,633 95,812 96,938 95,878 95,637 -4%
Lehman Brothers 9,026 9,343 10,512 11,326 11,925 12,426 13,281 13,090 12,851 12,694 12,980 -2%
Bear Stearns n/a n/a n/a 11,201 11,298 10,855 11,147 10,452 10,341 10,426 10,500 -7%
Morgan Stanley 56,710 58,131 60,349 62,679 63,708 62,909 62,392 61,319 59,875 58,538 57,799 -9%
Goldman Sachs* 15,667 16,512 18,666 22,627 23,050 22,967 23,494 22,677 22,136 21,145 20,647 -12%
Merrill Lynch 69,400 71,500 72,700 72,000 70,300 68,200 65,900 57,400 56,400 54,600 53,400 -27%
Charles Schwab 22,400 24,300 25,400 26,300 25,200 22,400 21,900 19,600 19,400 19,100 18,800 -29%
Average (excluding Schwab)                 -10.2%
Data: Goldman Sachs; *Company Reports

By Emily Thornton in New York

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