Rsums Are Piling Up on a Leaner Wall Street
Main Street may be spared ripple effect from belt-tightening among financial firms.
Until this spring, Roman was a "Master of the Universe." Executive head-hunters tried to recruit the Russian bond trader almost daily, with platinum salaries.
Then, in August, Russia defaulted on its bonds and devalued its currency.
Suddenly, Roman was out on the street with only a briefcase of rsums. So far he's sent out more than 300 applications. The response: two phone calls. "The competitiveness is very large," says Roman, who didn't want his last name used.
The cold shoulder Roman is getting illustrates the swift change that is taking place in the cubicles and corner offices of Wall Street - a strata of the economy that perhaps most symbolizes the success of the Golden '90s.
Only a few months ago, recruiters were searching far and wide for people like Roman. Now, in the face of global financial instability, "it's shrinking fast," says Douglas Leyendecker, a Houston-based financial recruiter.
Layoffs are spreading among some of the most blue-chip brokerages - Merrill Lynch & Co., Salomon Smith Barney, Nikko Securities. The impact is rippling throughout New York and beyond. Already, some expensive restaurants are devising lower-priced menus. Luxury-goods dealers, such as antiques sellers and jewelers, are bracing for a sales slowdown.
Not big spenders
Anticipating smaller bonuses, Wall Street traders, whose Tiffany paychecks helped lift the entire city and create a new generation of rich, are cutting back on spending. With profits down 40 percent in the third quarter, Wall Street firms will pay lower taxes.
Mercifully, a leaner Wall Street will not necessarily spill over onto Main Street, if history is any guide. Between 1988 and 1991, financial firms in the area, caught in the collapse of the junk-bond market, tightened their belts, reducing staffing by 10 to 15 percent.
But while Wall Street shrank, the rest of the United States marked time. "It's mainly Wall Street's problem and not a problem for the rest of the country," says Richard Sylla, a professor of financial history at New York University's Stern School of Business. "But if we had a severe crash, no doubt the rest of the country would feel the effects."
Until the latest round of layoffs, the securities industry had been a perfect example of an industry that was growing along with the buoyant markets. Some of the fastest-growing areas have been in the "exotic" areas of the business, such as trading "emerging market" bonds like the IOUs issued by the Russian government. Large pools of money known as hedge funds have also sprouted. Using borrowed money, they make large bets on the direction of interest rates, currencies, and stocks.
But these areas are now suffering the most. Internet postings are filled with the rsums of out-of-work Russian bond traders. As hedge funds unwind their positions, they are axing their staffs. The same is true of traders of junk bonds. As investors have fled to the safety of United States Treasury securities, these high-yield instruments have languished.
Celebrity not a shield
The carnage has even extended to some high-profile jobs. One economist, quoted in the newspapers regularly, recently returned from a Paris vacation to find his job had been eliminated. "I can tell you the job market stinks," he says, asking for anonymity.
Even those who keep their jobs are likely to grumble in the months ahead. Recruiters expect that Wall Street firms will keep a tight lid on salary increases. Bonus pools will be much lower.
"But, bear in mind that on a historical basis, we are still very high - last year was one of the
biggest years in Wall Street history," says Leslie Peyton Gordon, a managing director at Korn Ferry International, the nation's largest recruiting company.
Yet some Wall Street fields remain healthy. Recruiters say specialists in mergers and acquisitions, equity research, and foreign exchange are in demand.
"People who have spots to fill can take the opportunity to aggressively pursue top performers - it will be less expensive to recruit them now than six months ago," says Clarke Murphy, managing director of Russell Reynolds Associates Inc., a leading executive recruiting firm.
Recruiters recommend those who are out of work look to firms that are considering expanding, such as accounting firms or regional brokerage houses that don't have overseas exposure.
Mr. Leyendecker suggests job seekers look to areas of financial services that are undergoing deregulation, such as commercial banks that are branching out into the securities business. He also suggests job seekers consider pension funds and insurance companies. "Any of the places that get their capital from retirement will need to continue to invest," he says.
High-tech type jobs appear to still be in demand as well. Even companies that are cutting staff are still recruiting specialists in computer operations.
"No matter how bad it gets they will need these people to survive," says Richard Taylor, an executive recruiter with Taylor Rodgers Associates in Stamford, Conn.
But several Wall Street companies may be hiring with caution. Merrill Lynch, for example, which just laid off 3,400 people, also let go 900 technical consultants.
"The first people let go are the consultants," says Julia Van Valin, a recruiter with Open Systems Technologies.
Some recruiters expect Wall Street to stabilize in about six months. But that's not soon enough for Roman. He's set a deadline of one more month of looking in the New York area. Then, he's going to check out other cities. "I really need a job," he says, "I have a wife and family."