Junior Staff on Wall Street Eye Cuts, Ready Résumés

As the departures of Merrill Lynch chief executive Stanley O’Neal and Citigroup chief executive Charles Prince send shockwaves through Wall Street, more junior personnel at the city’s top investment banks are polishing their résumés, preparing for news of more job cuts.Next month starts bonus season, when bankers find out how large their year-end checks will be. Expect them to try to hold on through the bumpy fourth quarter in the hopes of locking in these bonuses before launching their job searches in earnest.“Nobody is leaving before their bonuses if they are not forced to,” a partner at the executive search firm Sextant Search Partners, Jonathan Goldstein, said. “After that, there will be so many bankers on the street that anyone looking to hire will have their pick of the litter.”Already, there has been a record-breaking 141,442 finance jobs cut so far this year, according to executive search firm Challenger, Gray & Christmas. That far surpasses the previous record of 116,647 jobs cut in 2001. In just the last three months, financial job cuts totaled 73,000 — 46% more than in all of 2006. Even that number could be dwarfed by what is to come.“The full impact of layoffs stemming from the subprime fallout has yet to be felt,” the chief economist at Moody’s Investors Service, John Lonski, said. “You will see layoffs begin to pick up toward year end and continue through the first quarter of next year.”During the last recession, financial industry employment in New York peaked in the third quarter of 1987 with 262,000 jobs. It reached its nadir three years later, with 209,000 jobs — a drop of 20%, according to Mr. Lonski. This means that in the last downturn, one out of every five jobs on Wall Street was lost. It took more than five years before the financial sector regained its pre-recession hiring levels.“If the damage is broader than we anticipated, we could see 20% job cuts again,” a professor of finance at the College of Business Administration at Northeastern University, Harlan Platt, said. “The simplest way to cut costs is to let people go.”October’s national jobless rate was 4.7%, the same as September, besting Wall Street estimates. Still, this number is actually 0.3 percentage points higher than last year — the steepest yearly gain since October 2003, according to Mr. Lonski. In addition, October’s three-month ratio of employment to the working-age population was down 0.4%. Since 1969, each time this number dropped by 0.5%, a recession occurred, he said.Employees at the bulge-bracket banks like Merrill Lynch and Citigroup are watching their chief executives leave, and are realizing that the risk of being fired is high, those who follow the industry say.“When new management comes in, the CEO takes a fresh look, new alliances are formed, and the people who are the closest advisers and allies of the former executive no longer hold that position. As the favored status changes, it ripples down through the organization,” the chief executive at Challenger, Gray & Christmas, John Challenger, said. Right now, “there is a lot of resume paper on the street — people have happy feet,” he said, adding that he is seeing triple the number of resumes on his desk than at this time last year.But as nerves shake among employees at the city’s big banks, there may be a silver lining. Some areas, particularly distressed debt, turnarounds, and special situations, are actually hiring.“There is so much money sloshing around in private equity, that the money has to flow somewhere, and it is most likely flowing into distressed debt and special situations,” Mr. Goldstein said. “We have received calls from some banks looking to selectively hire in areas where they are not currently strong but think there are opportunities.”Still, Professor Platt maintains that the distressed debt and turnaround business only grows when the market is bottoming out, and that this part of the cycle tends to be relatively short lived. Therefore, the jobs that are added will be unlikely to outweigh the thousands of jobs that will be lost elsewhere in the financial industry.Overall, experts are bracing for thousands of more cuts in the coming months.“My expectation is that the new individual coming in, like Mr. Rubin at Citigroup, will make every effort possible to show that the losses have already been stopped and the future is rosy,” Professor Platt said. “The quickest way to do that is by letting people go.”

Junior Staff on Wall Street Eye Cuts, Ready Résumés

Junior Staff on Wall Street Eye Cuts, Ready Résumés

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