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Wall Street Layoffs May Hurt National Job Growth

Wall Street Layoffs

First Posted: 12/22/11 02:44 PM ET Updated: 12/22/11 05:50 PM ET

As Wall Street traders cheered positive jobs data on Thursday, they seemed to ignore layoffs and bonus cuts on their own trading floors that will hurt growth in the broader U.S. jobs market in the coming months, TrimTabs Chief Executive Charles Biderman said.

U.S. jobless claims dropped to a 3 1/2-year low last week, the Labor Department said on Thursday morning, sending major stock indexes higher. But more current indicators for jobs and wages show opposite trends, said Biderman, a Wall Street veteran who founded the investment research firm in 1990.

"The conventional wisdom on Wall Street is that the U.S. economy is picking up steam despite the turmoil in the rest of the world," Biderman Said. "The key real-time indicators we track - wage and salary growth and online job demand - suggest Wall Street is wrong."

In contrast to the positive jobless claims figure, a TrimTabs index showed that a rise in online job postings has slowed over the past month . The firm's pay analysis showed that wages have fallen 1.2 percent over the past month, adjusting for taxes and inflation, a bigger drop than the 0.2 percent decline over the past three months.

Job cuts at big Wall Street banks including Goldman Sachs Group Inc, Morgan Stanley, JPMorgan Chase & Co and Bank of America-Merrill Lynch will only hurt job growth further, Biderman said, while dwindling bonus pools will add pressure to wage growth.

Large U.S. banks have outlined plans to lay off nearly 40,000 employees so far this year as a result of the European sovereign debt crisis and weak economic growth, according to a Reuters tally.

Reports from compensation consultants such as Johnson Associates and Options Group suggest that Wall Street bonuses may decline as much as 30 percent to 40 percent this year. That will only hurt U.S. wage growth more in the weeks ahead, Biderman said, since bonuses are typically paid from late December through early February.

The earnings report from Jefferies Group Inc on Tuesday may offer clues to broader Wall Street trends. Jefferies' fiscal year ends November 30, a month earlier than those of bigger rivals like Goldman and Morgan Stanley.

The investment bank laid off roughly 70 people in equities trading and cut overall compensation and benefits 24 percent during its fourth quarter. Chief Executive Rich Handler and a number of other senior executives also agreed to forgo bonuses for 2011.

"We recognize our shareholders had a tough year," Handler said. "We're shareholders and we're getting zero bonus."

(Reporting By Lauren Tara LaCapra in New York; Editing by Matthew Goldstein and Steve Orlofsky)


Copyright 2011 Thomson Reuters. Click for Restrictions.

Wall Street isn't the only place making big layoffs. Below are some of the largest corporate layoffs of all time:
11. Hewlett-Packard
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Biggest layoff: 24,600
Date of layoff: September 2008

One of the reasons former HP CEO Mark Hurd was widely admired on Wall Street was the ease with which he cut costs -- and headcount. Hurd's largest cut came after he bought IT consulting firm EDS, which Ross Perot founded. Hurd spent $13.9 billion to diversity beyond HP's core hardware operations. Once he closed the transaction, he fired 24,600 employees whom he felt would be redundant once the two companies were combined.

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