After Massive Job Cuts, Wall Street's a Different Place
On the June day that Michael Reiner lost his job as a credit strategist for Société Générale in New York, he turned in his cell phone, visited a nearby store to replace it, and called his wife. She was at their home in Briarcliff Manor, N.Y., watching The Company Men, a film about corporate downsizing. He was shocked, he says, by the way his job “simply came to an end.”
The 44-year-old former managing director was caught up in a wave of firings that will wash away more than 220,000 jobs in the global financial-services industry this year, eclipsing 174,000 dismissals in 2009, data compiled by Bloomberg show. Almost every week since August has brought news of firings. HSBC Holdings, Europe’s biggest lender, announced that month it would slash 30,000 jobs by the end of 2013. In September, Bank of America, the second-largest U.S. lender, said it too would cut 30,000. Both banks are trimming about 10 percent of their workforces. In November, BNP Paribas, France’s largest bank, said it will cut about 1,400 jobs at its corporate and investment-banking unit, and UniCredit, Italy’s biggest, said it plans to eliminate 6,150 positions by 2015. “This is a structural change,” says Huw Jenkins, a London-based managing partner at Brazil’s Banco BTG Pactual. “The industry is shrinking.”
Faced with higher capital requirements, the failure of exotic financial products, and diminished proprietary trading, the industry may be experiencing more than a cyclical dip. “At many firms, a lot of investment bankers have been convinced that we are living now in a limited period where things are a bit more difficult, and afterwards the old world will come back,” says Kaspar Villiger, chairman of Zurich-based UBS. “This illusion has now vanished.”
Banks, insurers, and money management companies in North America have announced 50,000 job cuts this year. That’s more than twice last year’s total, though fewer than the 175,000 in 2008. Wall Street won’t regain its lost jobs “until about 2023,” Marisa Di Natale, an economist at Moody’s Analytics, said in an e-mail, adding that former Wall Streeters will have to find employment in healthier corners of finance or “go to other industries altogether.” Steven Eckhaus, chairman of the executive-employment practice at Katten Muchin Rosenman in New York, says that with the job outlook so grim he has stopped giving his “spiel” to clients about inherent talent leading to new work.
Financial companies in Western Europe have announced about 125,000 dismissals this year, almost double the region’s losses in 2008 at the depths of the financial crisis, Bloomberg data show. Head count in the City and Canary Wharf financial districts of London may fall to 288,225 by the end of the year, 27,000 fewer than in 2010 and the lowest since at least 1998, when there were 289,666 jobs, according to the Centre for Economics and Business Research in London. “It’s a once-in-a-generation challenge,” says John Purcell, founder of executive search firm Purcell & Co. “Everyone who has worked in the City since 1985 will have no idea of how to cope with this level of dislocation.”
In interviews, a dozen people who have lost jobs at Lloyds Banking Group, Royal Bank of Scotland, Jefferies, and other firms described growing pessimism about their prospects. For Reiner, being let go by Société Générale was his second job loss in four years. He worked at Bear Stearns for 14 years until the firm collapsed in March 2008 and was taken over in a fire sale by JPMorgan Chase. When he began looking for work after that, he says he “wanted to find a place for the next 14 years.” It’s harder to talk about losing a job the second time, he says: “There are a lot of people I haven’t told.” Now he spends his time going to his daughter’s field hockey games and managing his investments. He plans to pursue his hobby of making maple syrup from the trees in the backyard of his home.
Morale on Wall Street and in London is “probably as bad, if not worse” than it has been in decades, says Philip Keevil, 65, a former head of investment banking at S.G. Warburg and now a partner at New York-based advisory firm Compass Advisers. Neil Brener, a London psychiatrist who treats patients in the finance industry, says the stress is contributing to panic attacks, binge drinking, and chest pains. “Because there are fewer jobs, people are unhappy about being stuck,” Brener says. “They don’t have options about moving, and there is a sense of feeling trapped.”
Still, they’re trapped in positions many would envy. Although Goldman Sachs set aside 24 percent less to pay its employees in the first nine months of 2011 than in the same period last year, the amount, $10 billion, was equal to $292,836 for each of its 34,200 workers as of Sept. 30. That’s almost six times the median household income in the U.S., where 49.1 million live in poverty, according to Census Bureau data.
Scott Schubert, 49, lost his job as a mergers-and-acquisitions banker at Jefferies, the New York-based securities firm, amid the financial crisis in late 2008. He thought unemployment would last 12 months, at most. “The first year out was fruitless,” he says. “There wasn’t much hiring going on at all.” By the middle of 2010 more potential employers seemed interested, and he felt “something was imminent.” Nothing happened. This year he has become increasingly disheartened by bad news on Wall Street, and it’s more difficult to stay in touch with former colleagues as time goes by, he says. While his investment choices haven’t been “too terrible,” he says he may consider selling his house if he doesn’t find a job in the next six months. “These are by far my darkest days,” he says. “It’s harder and harder to look for a job and feel that there’s nothing there.”