Employment in financial services – four years ago rich and bloated, are shrinking as quickly as George Costanza (of Seinfeld) coming out of the pool.
The proverbial hog cycle (farmer sees high prices this summer; he buys tons of fertilizer and grows a bumper crop for next summer; but when next summer arrives an oversupply causes the prices he receives to plummet and he now can’t even afford fertilizer for the following year’s crop at higher prices etc.) is alive and well in the banking industry. Except “people” are the fertilizer, and are treated pretty much like &%it.
Even though a percentage of those being fired might indeed be baggage accumulated during the wasteful years preceding the crisis, many of these folks are still desperately needed in order to stabilize and ‘fix’ the business. Unfortunately those who decide who is needed versus who is baggage are more concerned about their own jobs than making wise choices, just as most senior managers are focussed on making Wall Street analysts happy rather than maximizing the long term viability of their financial services firm.
The good news (based on June’s employment data for the U.S.) is that there are jobs being created despite the high unemployment number – in almost every industrial sector – just not nearly enough to absorb the fallout from financial services, construction and of course government (also undergoing shrinkage). Obama’s plan is to create incentives so there are more jobs in these other industries, but the bad news is that it’s going to take a long time for those being laid off to make the transition from Wall Street to Main Street.
The hog cycle (and experience) suggests that once the financial services industry pumps up the bottom line by cost cutting, there’ll be scramble to hire back (at a huge cost) many of those people they’ve just let go (which although is labelled as ‘cost cutting’ is really a massive added expense considering severance and lost ‘human capital’). Our economy’s (and society’s) obsession with optics rather than substance is responsible for inefficiencies like this. For those just beginning college, this all means that their graduation should co-incide with a tight market for financial professionals. For the rest it means re-inventing yourself or being very patient.