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Now the Robots Are Coming After Wall Street Jobs
Some interesting commentary about what’s behind jobs cuts in the financial industry, via the FT:
Big banks in Europe and the US announced almost 100,000 new job cuts this year, and thousands more are expected from BNP Paribas and Barclays early next year, as the wave of lay-offs that began in 2007 shows no sign of abating.
The 2015 cuts — which exclude the impact of major asset sales — amount to more than 10 per cent of the total workforce across the 11 large European and US banks that announced fresh lay-offs, according to analysis by the Financial Times. Analysts believe 2016’s misery could be more widespread than just those two banks. New regulations mean all banks must hold more equity, and that means they have to earn higher profits to keep return on equity at the levels investors demand.
“I don’t think we can rule out the end of job cuts until RoEs recover to acceptable levels,” said Jon Peace, London-based banks analyst at Nomura. “Digital transformation could also be a driver of further headcount reduction longer term, with retail banks cutting branches in favour of online services and investment banks cutting back offices in favour of online technologies such as blockchain.”
Mike Mayo, New York-based banking analyst at CLSA, said that even though US banks announced fewer cuts than European lenders this year, their employees are still at risk in 2016. “The additional electronification of the security markets should result in an ongoing swap of capital for labour . . . more machines over people,” he said, adding that US banks were also feeling the pressure of “the worst decade of revenue growth since the great depression”.
So more is going on here than just the “rise of the robots.” Still, the piece does remind us that the universe of jobs affected by “electronification” may be pretty big. And of course those “new online technologies” will also generate jobs, too. Must not forget that.
But as one recent study argues, “Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as the US economy is becoming increasingly digitized.”
Published in Culture, Economics
This was predicted for the future . . .
. . . a long time ago.
Seawriter
This started awhile ago when the quants arrived.
A related job area impacted by electronification is personal financial consultant. The rise of automated, web-based portfolio management sites will reduce the need for these people.
I still use a flesh&blood investment manager but I’m keeping an eye on the automated sites…
Yeah, this is hardly new. The process started back in the 1950s, with the creation of Automatic Data Processing, now ADP. Wall Street had a huge “settlement” crisis back in the 1960s, which after some interim measures, resulted in the creation of the Depository Trust Corporation in the 1970s.
It’s never stopped.
How much real value do people whose job title is “Trader” add to the economy? On Wall Street, they earn huge salaries (north of $200K), but do what? And my old prediction still stands. When Wall Street finally figures out that they can perform all the same functions they do now, but from North Carolina or Florida at a fraction of the cost, Wall Street collapses. How long could New York City remain viable without the financial markets to pay their exorbitant taxes?
Just like intermediaries in any industry—and they exist in almost all industries—they facilitate transactions, which adds value. Try selling your house without using a broker or a multiple-listing service and see how it goes. Try selling a stock by taking out a classified ad. (There are two types of traders, btw, agency, as above, and principal. Principal traders buy and hold for a gain, hopefully, so stand to lose if they’re wrong. A bank loaning you money is acting as a principal trader, for instance.)
Not long. It’d be Detroit without Wall Street.
Those damned Wall Streeters. Don’t DO anything but push around paper!
I can’t begin to tell you how much I despise that quip.
Do you live in a house you didn’t build with your own hands? Do you eat food grown or raised by someone you don’t personally know? Do you drink safe, clean water that you our a family member did not carry from a spring? Are you happy you don’t use an outhouse? Do you have heat from a fuel source you or your neighbors did not cut/mine/extract? Is the cloth for the clothes you are wearing made outside your town?
If you answered yes to any of these, your very existence depends on a complex financial web of futures, options, bonds, stocks, notes, bills, letters of credit etc and the people who issue, trade and invest in them.
This has actually been a trend for two decades, as firms have decamped to Greenwich, Stamford, Jersey City, etc. And there have been significant mayoral efforts (Bloomberg, Giuliani) to keep firms in place (and paying taxes, often reduced.)
But Wall Street will always be with us in a significant way because New York, shocking though it may seem, has a certain cache with young people that brings in a new crop of hopefuls every single year. They’ll pay stupid rents, work long hours, and maybe make a fortune or depart when they turn 30. And in the meantime a million more kids have lined up to take their place.
My firm moved out, then moved back.
There’s a substantial network effect to being in NYC. It’s much easier to hire people there, for instance, and it’s much easier for the clients, who are also the clients of other similar firms, to visit everyone if they’re in one area, just as restaurants and theatres tend to cluster in one area.
Agreed. Until you’ve done three meetings at three different offices in a single day within a square mile, you don’t appreciate what NY brings to the table. And yes, every client wants to visit once a year.