Analysis: Wall Street's hiring frenzy eases as worries grow over economy, market slump

Korn Ferry

23/06/2022 11:00

By Sinéad Carew and Saeed Azhar
    June 23 (Reuters) - With mounting uncertainty around the
U.S. economic outlook and the resulting slump in financial
markets, Wall Street is easing up on hiring after a recruiting
frenzy last year. 
    Wall Street companies including banks like Citigroup Inc
 C.N , JPMorgan Chase & Co  JPM.N  and Wells Fargo & Co  WFC.N 
were facing cutthroat hiring competition and being forced to pay
more to recruit and retain talent in 2021 and early this year.
Bonuses jumped to their highest level in 15 years.  urn:newsml:reuters.com:*:nL3N2VQ2UF
 urn:newsml:reuters.com:*:nL1N2TZ1A9 
    However, recruitment consultants, executives and recent data
show that hiring frenzy is diminishing.   
    "At the end of 2021 it was white hot with unprecedented
demand for hiring and pay," said Alan Johnson, managing director
at compensation consulting firm Johnson Associates. "It's
quickly evolving from white hot to normal, and maybe by the end 
of this year getting cold. We're certainly in a transition."
    The latest U.S. Bureau of Labor Statistics data shows that
while employers in the securities, commodity contracts,
investments, funds and trusts category were still hiring, the
pace slowed sharply in May with 1,200 jobs added that month
compared with the 4,600 in April. This compares with a 3,400
monthly average for 2021, when the sector saw its biggest annual
headcount expansion since 2000.
    Alberto Mirabal, senior vice president for investment
banking at recruitment firm GQR Global Markets, said some
clients have pressed pause on some talent searches while they
wait to "see how things shake out" before expanding their
already large teams amid slumping global markets.  urn:newsml:reuters.com:*:nL2N2XG1OQ 
    "We're seeing a bit of a slowdown," he said.
    Soaring inflation exacerbated by Russia's invasion of
Ukraine and resulting interest rate hikes are making some Wall
Street companies nervous about the risk of a recession.
 urn:newsml:reuters.com:*:nL1N2Y013Z 
    Some pockets of the financial industry are already seeing
layoffs, most notably the mortgage segment, which is uniquely
vulnerable to interest rate hikes that hurt home sales.
 urn:newsml:reuters.com:*:nL1N2Y8187 
    JPMorgan Chase & Co  JPM.N  is laying off hundreds of
employees in its home-lending business and reassigning hundreds
more this week, according to Bloomberg.  urn:newsml:reuters.com:*:nL4N2Y92XL 
    But overall, the recruiters said that the industry is not
yet seeing broad hiring freezes or layoffs. And some smaller
players, like boutique investment bank Lazard  LAZ.N , are
looking to take advantage of the shifting climate to snag talent
for themselves.
    Lazard Chief Executive Kenneth Jacobs said a hiring slowdown
was helping his firm attract new talent after 2021, which he
said was the toughest in a decade for staff retention and pay.
    "The competition for talent is diminishing," Jacobs told a
Morgan Stanley conference last week. "I think we're going to try
to take advantage."
    Gloria Mirrione, a Korn Ferry search consultant for asset
management clients, said she started seeing "a more tempered
hiring pace" around the end of March and into April after a
"hiring frenzy" during the second half of last year.
    Hiring in environmental social and governance (ESG) and
impact investing, a hot area for global investors in recent
years, was especially busy, she added.  
    "The work level is more manageable, with maybe a bit more
uncertainty coming about how the rest of this year will shape
up," she said. 
    However, recruitment trends vary across Wall Street.
    Investment banks, in particular, are facing a tough time
with revenue year-to-date down by nearly 38% on the same period
a year ago as deals plunge amid market jitters.  urn:newsml:reuters.com:*:nL4N2XV2V7
    “The biggest single drop off in activity is in the equity
capital markets space," according to Julian Bell, managing
director and head of Americas at talent consultancy Sheffield
Haworth. "This means that broker-dealers as opposed to
full-service banks will suffer disproportionately." 
    Brokers in healthcare/biotech and technology, two of the
largest equity capital markets sectors, will suffer most, he
said. 
    But while hiring is slowing and pay expectations are lower
after unusually strong compensation in 2021, investment bankers
are not concerned about imminent layoffs. 
    "They still think they're relatively understaffed for the
deal volumes that they have," said Anthony Keizner, managing
partner at Odyssey Search Partners, whose clients include
private equity, hedge funds, and investment funds. Some clients
still have a big appetite for talent, he said.
    "Maybe the foot is slightly off the gas, but the car isn't
about to crash," said Keizner.

 (Reporting By Sinéad Carew in New York and Saeed Azhar in
Dubai; additonal reporting by Lucia Mutikani in Washington DC,
and Saqib Iqbal Ahmed and Elizabeth Dilts Marshall in New York.
Editing by Michelle Price and Nick Zieminski)
 ((Saeed.azhar@thomsonreuters.com;
sinead.carew@thomsonreuters.com))