Wall Street is grappling with the consequences of a hiring spree during the pandemic. Job cuts at major US banks are projected to exceed 11,000, resulting in the most challenging job market for recruitment since the 2008 financial crisis.

As per a Financial Times report, the layoffs are occurring as executives aim to reverse the effects of an extensive hiring spree that took place during the pandemic. Banks had expanded their workforce to handle the surge in deals and trading activity, but now they are seeking to reduce headcounts as the economy rebounds.

Citigroup recently made headlines by revealing its intention to eliminate 5,000 positions, primarily in the fields of investment banking and trading, by the conclusion of the second quarter. This move follows similar actions taken by other major banks, including Goldman Sachs and Morgan Stanley, which have also implemented significant job cuts impacting thousands of bankers.

“When you look at metrics like the number of jobs coming up, conversion of résumés that turn into interviews and those interviews that turn into offers, those numbers are the most sluggish we’ve seen in a long time,” Max Kemnitzer, managing director for banking and financial services at recruiter Michael Page in New York told FT.

According to the Financial Times report, companies, driven by concerns of missing out in a competitive labor market, have resorted to offering substantial retention payments to retain their current staff while simultaneously engaging in aggressive recruitment efforts.

The five major banks that hold a dominant position on Wall Street, namely JPMorgan Chase, Bank of America, Morgan Stanley, and Citigroup, had a combined global workforce of 882,000 employees by the end of the first quarter. This figure remained relatively stable throughout 2022, representing an increase of over 100,000 employees compared to the end of 2020.

Among the major banks, Goldman Sachs was the sole institution to observe a notable decrease in its headcount during the first quarter of the year. The bank's workforce experienced a decline of 6.4 per cent, reaching 45,400 employees, marking the most substantial drop in years. 

In contrast, Morgan Stanley's headcount slightly declined to 82,266, while Citigroup's remained relatively unchanged. The report also mentioned that JPMorgan has not announced any significant reductions in its workforce.

Senior bankers have noted that executives are facing challenges in significantly reducing overall headcount. One contributing factor is the slower rate at which employees are leaving their positions, which is attributed to decreased demand for new appointments. This decline in demand extends beyond banks and also affects asset managers and large technology groups.

Financial Times also reported that the traditional recruitment season on Wall Street occurs during spring, with bankers receiving their annual bonuses in February and subsequently seeking new opportunities in March. Typically, most job transitions are finalised by the end of June.

However, this year witnessed a disruption to this pattern due to both reduced demand and the recent regional banking crisis in the United States. The crisis has raised concerns about potential stricter regulations, further impacting the recruitment landscape.