The Street's jobless recovery

NEW YORK (Reuters) - When Matt Prendergast was laid off in 2008 after Bear Stearns collapsed, he expected to find a new job right away. With more than 20 years’ experience as an investment banker, he thought he was sitting pretty.

Matt Prendergast, who lost his job at Bear Stearns and is currently unemployed, leaves the gym in business attire after his morning workout in Ramsey, New Jersey February 24, 2010. REUTERS/Jessica Rinaldi

A year and a half later, he is still looking for work.

“When Bear Stearns happened, the thought was, that would be the watershed event and the market would let off the appropriate amount of steam and things would settle down,” said Prendergast, 51, a former managing director who headed a banking team focused on the insurance sector.

“In reality, that turned out to be the tip of the iceberg,” he said.

Though few outside the financial industry will shed tears, Wall Street is experiencing a jobless recovery.

The biggest banks have bounced back from the worst financial crisis in 70 years, but for thousands of former mid-level executives like Prendergast, work remains elusive.

Financial companies have slashed about 80,000 securities, commodities and investment jobs in the United States since employment peaked in mid-2008 and the credit crisis set the stage for a costly rescue funded by taxpayers.

The profits are back, especially at firms like Goldman Sachs Group Inc GS.N and JPMorgan Chase & Co JPM.N, and bonuses are soaring too. Wall Street bonuses rose 17 percent in 2009 to $20.3 billion, according to a report this week by the New York Comptroller.

But the big paydays have not translated into bigger payrolls.

“Wall Street is a long way from back,” said John Carter, a recruiter at New York’s Hagan-Ricci Group Inc. “There’s no question that from the peak of 2006 and rolling into 2007, there are still a lot of people displaced.”

Main Street and Wall Street often seem like separate worlds, but in this economic recovery, they have a little more in common.

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As growth resumes and productivity edges up, the unemployment rate continues to hover around 10 percent as companies grapple with an uncertain outlook.

Financial firms are skittish too. One fear is that the trading boom that powered the 2009 rebound might not last, dampening results and lessening the need to bulk up staff.

Another concern is that regulations pending in Washington will slam trading operations at major firms. Banks are unlikely to hire more people until they learn the new rules of engagement -- and that could be months away.

“I don’t think we will see these companies going back to their heady days any time soon,” said John Challenger, the founder of Challenger, Gray & Christmas, an outplacement firm.

All told, financial firms employ about 793,000 people in securities, commodities and investments in the United States, down from 872,000 in June 2008, just before the worst of the financial crisis, according to government statistics.


Job losses in the financial industry have had a devastating impact on state and local budgets. Wall Street usually accounts for about a fifth of New York’s tax revenues, despite the fact that the sector represents less than 5 percent of jobs.

During the recession, New York’s financial services sector shed 44,200 jobs, a 6.1 percent reduction, according to a report by State Comptroller Thomas DiNapoli.

It may not be Detroit, but the bloodletting has been widespread. U.S.-based banks with large operations in New York shed huge numbers of jobs during the downturn. Goldman Sachs cut at least 4,800 jobs; Citigroup eliminated 75,000; Bank of America, 45,500, including staff from Merrill Lynch; JPMorgan Chase, 23,700; and Morgan Stanley, 8,600.

There were also casualties from the collapse of Lehman Brothers and Bear Stearns, though many of their employees went to rival banks.

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A lot of jobs lost, for sure, but overall layoffs have been less severe than after the dot-com crisis, when nearly 100,000 people in the securities, commodities and investments sector were canned. The difference this time? Companies are not hiring up a storm now that the industry’s fortunes have revived.

“Initially, managers can be very cautious about hiring because they have the memory very much in mind of having to fire people and are worried that their own managers will be upset with them if they do start hiring prematurely,” said Douglas Elliott, a former banker with JPMorgan Chase and a fellow with the Brookings Institution.

If the recovery seems sustainable, managers will begin “staffing up for the opportunities” rather than focusing on the risks, Elliott said.


It is a very good time, however, to be an undisputed master of the universe. While mid-level Wall Streeters struggle to find work, opportunities abound for rainmakers and senior-level bankers.

Firms want people who can instantly enhance profits, said Michael Karp, chief executive at executive search and consulting firm Options Group in New York.

In recent months, Morgan Stanley has hired Gregory Fleming, a former president of Merrill Lynch. JPMorgan hired Jacob Frankel, a former governor of the Bank of Israel. And two former Merrill Lynch investment bankers, Sam Chapin and Todd Kaplan, returned to the firm now merged with Bank of America.

“Anyone that is really good will find a job,” Karp said. “Are there as many jobs in the market as there were three or four years ago? There are not. It is much tougher to find a job.”

Health care, energy and financial services investment bankers remain in demand, recruiters said.

Wealth management also is in a sweet spot as firms like Morgan Stanley MS.N, Smith Barney and Bank of America Merrill Lynch BAC.N expand their retail brokerage operations.

And there are signs that banks are opening their doors for recent college graduates.

“It is time to reload the gun and get the classes in,” said Brad Hintz, an analyst with Sanford C Bernstein and a former Morgan Stanley executive. “You have to fill it up for a more normal environment after the downturn we’ve been in.”

But for the large numbers of unemployed mid-level bankers and traders, prospects are grim. Major banks have announced few initiatives to hire. One exception is Morgan Stanley, which plans to recruit up to 400 traders and salespeople.

Some are taking advantage of their unexpected sabbaticals. Prendergast, the former Bear Stearns investment banker, used his 18 months to not only look for a job, but to spend time with his two children and to work on his physical fitness.

He thinks that the right opportunity is not far away, and in the meantime he meets former colleagues and networks.

“I’ve spent my life in financial services and I really like it,” Prendergast said. “I find it really interesting and I have a lot of great skill sets and experiences that I think would be helpful.”

The hope of another Wall Street payday -- and no one does paydays better -- can be a powerful motivator.

“The reality is you get used to a certain level of compensation that is hard to match elsewhere,” Prendergast said.

Reporting by Steve Eder. Additional reporting by Matthew Goldstein, Clare Baldwin and Joe Rauch; editing by Jim Impoco and Robert MacMillan