EDITOR'S TAKE: The new model - fewer staff, higher pay

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According to various doom laden prognoses, we are in for a jobless recovery in the economy at large. It looks like investment banks are leading the way.

In the first half of 2009, revenues at five leading banks (Goldman Sachs, Morgan Stanley, JPMorgan, Credit Suisse, Deutsche Bank) rose 24% compared to the same period last year; net income rose 320%, and headcount fell 2.3%.

Banks like Goldman and Deutsche continued trimming headcount in the second quarter, even though revenues went through the roof.

And while there's hiring, there's not really very much of it. Studies suggest the number of new financial services jobs in the City of London is down anything from 60-80% year on year.

David Schwartz, founder of US headhunting firm DN Schwartz & Co and a former head of recruitment at Goldman, says hiring is currently "selective, strategic and opportunistic," and that this is unlikely to change.

"There are fewer investment banks than there were, and the investment banking business is going to be a lot smaller at firms like Citigroup in future. I really can't imagine a firm deciding to add 25% to its workforce over the next two years," he says.

Naturally, there are exceptions. Nomura is looking to increase its US headcount by

40% and Barclays is hiring 750 people as it attempts to build a European and Asian equities business virtually from scratch.

However, among the established global players there's little likelihood of a big headcount push in the style of 2003-2006, when Goldman added 7,000 people and Morgan Stanley increased recruitment of MDs and EDs by 85% in 2006 alone.

"The first two quarters have been pretty good across the board and firms are using this opportunity to upgrade," says Michael Karp, chief executive of international search firm Options Group. "However, we're not going to return to a situation in which banks are overleveraged on headcount," he adds.

Instead of ramping up, Karp says banks are focusing on rewarding the staff they have more effectively. Recent compensation figures confirm this: across the five banks listed above, net revenues rose 24% in the first half; pay per head was up 38%.

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