Analysis: Wall Street’s hiring frenzy subsides as concerns about the economy and market slump mount

By Sinéad Carew and Saeed Azhar

(Reuters) – With uncertainty growing over the U.S. economic outlook and financial markets tumbling as a result, Wall Street is cutting back on hiring after a recruiting frenzy last year.

Wall Street firms, including banks like Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co, were facing cutthroat hiring competition and forced to pay more to recruit and retain talent in 2021 and early this year. Bonds jumped to their highest level in 15 years.

However, recruiting consultants, executives and recent data show that the hiring frenzy is winding down.

“By the end of 2021 it was red hot with unprecedented hiring and pay demand,” said Alan Johnson, managing director of compensation consulting firm Johnson Associates. “It’s rapidly evolving from hot to normal, and maybe by the end of this year it’ll cool down. We’re certainly in a transition.”

The most recent data from the US Bureau of Labor Statistics shows that while employers in the securities, commodity contracts, investments, funds and trusts category were still hiring, the pace slowed dramatically in May with 1,200 jobs added that month compared to 4,600 in April. This compares with a monthly average of 3,400 for 2021, when the sector saw its biggest annual headcount expansion since 2000.

Alberto Mirabal, senior vice president of investment banking at recruiting firm GQR Global Markets, said some clients have pressed a pause on some talent searches as they wait “to see how things evolve” before expanding their already large teams amid the fall of global markets.

“We’re seeing a little bit of a slowdown,” he said.

Skyrocketing inflation exacerbated by Russia’s invasion of Ukraine and ensuing interest rate hikes are making some Wall Street firms nervous about the risk of a recession.

Some pockets of the financial industry are already experiencing layoffs, most notably the mortgage segment, which is especially vulnerable to interest rate hikes that hurt home sales.

JPMorgan Chase & Co is laying off hundreds of employees in its home loan business and reassigning hundreds more this week, according to Bloomberg.

But overall, recruiters said the industry is not yet experiencing blanket hiring freezes or layoffs. And some smaller players, like boutique investment bank Lazard, are looking to take advantage of the changing climate to bring in talent for themselves.

Lazard Chief Executive Kenneth Jacobs said a slowdown in hiring was helping his company attract new talent after 2021, which he said was the toughest in a decade for staff retention and pay.

“The competition for talent is thinning,” Jacobs said at a Morgan Stanley conference last week. “I think we’re going to try to take advantage.”

Gloria Mirrione, Korn Ferry’s search consultant for asset management clients, said she began seeing “a more subdued hiring pace” in late March and April after a “hiring frenzy” during the second half of the year. past.

Hiring in environmental, social and governance (ESG) and impact investing, a hot area for global investors in recent years, was especially busy, it added.

“The level of work is more manageable, with maybe a little more uncertainty about how the rest of this year will play out,” he said.

However, hiring trends vary on Wall Street.

Investment banks, in particular, face a tough time with year-to-date revenue down nearly 38% compared to the same period a year earlier as operations slump amid jitters From the market.

“The biggest single drop in activity is in the equity capital markets space,” according to Julian Bell, managing director and head of the Americas at talent consultancy Sheffield Haworth. “This means that broker-dealers, rather than full-service banks, will suffer disproportionately.”

Health/biotech and technology corridors, two of the largest equity capital markets sectors, will suffer the most, he said.

But while hiring is slowing and pay expectations are lower after unusually heavy compensation in 2021, investment bankers aren’t worried about looming layoffs.

“They still think they’re relatively understaffed for the volumes of business they have,” said Anthony Keizner, managing partner at Odyssey Search Partners, whose clients include private equity, hedge funds and mutual funds. Some clients still have a huge appetite for talent, he said.

“Maybe the foot is a little bit off the throttle, but the car is not about to crash,” Keizner said.

(Reporting by Sinéad Carew in New York and Saeed Azhar in Dubai; additional 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)

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