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?").
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.
|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|
|Average (excluding Schwab)||-10.2%|
|Data: Goldman Sachs; *Company Reports|
By Emily Thornton in New York
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