First of all there were going to be 50,000 investment banking redundancies. Then there were going to be 75,000. Now there are going to be 100,000. We detect a trend.
If you’re a professional financial pundit who wants to make a point, it helps a lot if you preface it with the suggestion that a lot of investment bankers will lose their jobs. The greater the number of bankers for whom you foresee doom, the greater the likelihood you’ll get a mention.
Hence we are in the realms of competitive punditry, fuelled by Schadenfreude - because who doesn’t want to see ex-Masters of the Universe relegated to the dole queue?
Meredith Whitney is a case in point. She said a month ago that another 50,000 investment banking jobs would still be cut. Yesterday, Meredith arbitrarily doubled this: now she thinks there might be another 100,000 layoffs coming.
Why? No one knows. Meredith didn’t really justify her deteriorating prognosis. But have things really got that much worse since August?
She isn’t the only one at it. The UK’s Centre for Economic and Business Research has a good line in predicting doom for the City, both in terms of pay and jobs. Last year, for example, it said City bonuses fell 35%, to £4.4bn. And yet figures from the Office of National Statistics, released yesterday, suggested financial services bonuses last year fell only 10% last year, to £13bn. Admittedly, this was across the UK and included retail banking, but the £13bn figure is being widely touted as representing pay for bankers in general.
The CEBR's equally doom-laded City headcount predictions are harder to validate, based – as they are – on an obscure definition of City employees as everyone working in:
‘….securities dealing, international banking, corporate finance, derivatives and forex activity, fund management (including hedge funds), specialist insurance (e.g. Lloyds) and professional services such as legal, accountancy and consultancy directly supporting other city jobs. They include jobs in Canary Wharf and in the West End as well as those in the Square Mile and do not include non-city-type jobs – e.g. in hairdressers, retail or wine bars – even if they are based within the Square Mile.”
The CEBR thinks there are around 255,000 of these financial services jobs in London now, about 100,000 less than in 2007. Is this right? Who knows.
Yesterday, strategy consultants Roland Berger also plunged into the punditry market, picking the seemingly arbitrary figure of 500,000 investment banking employees globally and suggesting another 75,000 of them will go soon.
Grasping at reality
The best indicators of reality are government figures for financial services employment combined with banks' own headcount figures. The former indicate that headcount has fallen, but by no means as much as the doomsters might suggest.
In the US, figures from the New York State Department of Labour suggest the number of people involved in financial services activities in New York City was down....1.3% year-on-year in July 2012 to around 450,000. In the UK, ONS figures for employment across the UK finance and insurance sector as a whole suggest headcount has fallen by around 4% since its peak in 2007, or by 50,000 people to 1.25m.
When they're available, investment banks' own headcount figures also tell a different story. Between 2007 and the first quarter of 2012, the combined global headcount figures for RBS Banking and Markets, Barclays Investment Bank, Goldman Sachs, Deutsche CIB, Credit Suisse Investment Bank, UBS Investment Bank and JPMorgan Investment Bank actually rose by 2,808. Evidently, the 25,000 employees of Lehman and the 14,000 employees of Bear Stearns disappeared during this period, but that still suggests a net global loss of around 36,000 investment banking jobs. That's certainly a lot, but it's not hundreds of thousands.
Needless to say, however, no one wants to know this. Therefore, we will stick with our original suggestion: ten million investment banking jobs will go before 2014. Interviews are available upon request.