Not all job losses are created equally

Bloomberg reports the job loss figures for 2011-2012 will now surpass the number of jobs lost in 2008 through 2009.  What can job seekers expect in 2011 and beyond? To set the tone, I quote Citigroup’s Vikram Pandit, CEO of Citigroup on his outlook “Financial services face an extremely challenging operating environment with an unprecedented combination of market uncertainty, sustained economic weakness in developed economies and the most substantial regulatory changes we have seen in our lifetimes.” This is dire stuff, but can’t we expect some turn around in jobs once developed economies right themselves? The answer depends on whether the job losses are a result of cyclical or structural changes. Widening Sovereign spreads, ratings downgrades, Euro fragmentation and political and financial headwinds in the US are causing uncertainty for the industry. As earnings have slipped, banks have been quick to trim staff.  Trading and Sales teams were reduced, expansion plans were shelved, and noncore businesses were eliminated. If these are cyclical factors, then we would expect the usual rebound in hiring once developed economies recover.  Structural changes are tougher to navigate. According to a report conducted by Federal Reserve Economists, Erica Groshen and Simon Potter,(, there may be different dynamics at work when industries are effected by structural change. Hiring managers tend to “let the dust settle before they start rehiring”.  Groshen and Potter observed that in recent recessions the job losses tended to be more structural and therefore more permanent.  Structural change could also signal job gains as well as losses.  Jobs can migrate or relocate within a broad industry. The willingness for hedge funds to hire skilled traders from banks, as banks exit proprietary trading activities is a perfect example of this relocation. Hedge fund assets have grown  to record levels in 2011 to $2 trillion according to Chicago based Hedge Fund Research. If there is a silver lining it would be that growth in that sector will require infrastructure building e.g. PMs, Research, Trading and Risk Management. Implementation of Dodd Frank has created demand for professionals who have a solid understanding for clearing mechanisms and for those well versed on the new standards. These are examples of how structural change can have a positive effect on other areas within our industry. For those in the throes of a job search, it may help your search strategy to think about where gains are being made elsewhere in our financial industry and how you can position yourself accordingly.

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