Perhaps the only thing that can make morale lower these days are actual GDP figures confirming what some economists already believe: that we're in the throes of a double dip recession.
A quick scan of the headlines this morning sent my head spinning. Across the pond HSBC is preparing to cut 10,000 jobs, Lloyds Banking Group 15,000, while Credit Suisse is gearing up for about 2,000 layoffs. Meanwhile UBS and Barclays are also reportedly preparing a round of cuts as well, a tally that no doubt will number in the thousands.
Here in the U.S. things look just as bleak, with Goldman Sachs quietly laying off employees all summer due to the fixed income trading slump that has also plagued its European counterparts. Earlier this month Morgan Stanley disputed media reports that it was considering layoffs of its own, although those denials are unlikely to cheer up anyone other than its own underperforming advisers.
The common refrain we've been hearing throughout this summer of discontent is that firms are taking drastic steps to rein in costs as they slog through a depressed trading environment. And of course these unsettling headlines are coming at a less than ideal time, with the U.S. flirting with a potentially cataclysmic downgrade of its credit rating, while worries over the European debt crisis continue to spook investors.
But the most frightening aspect of Wall Street's struggles are what they could portend for the rest of the gasping U.S. economy. As The Atlantic's Daniel Indiviglio pointed out last month, Wall Street layoffs often foreshadow broader job losses throughout the rest of the economy.
And while thankfully that may not be the case in this instance, widespread layoffs in the finance sector will almost certainly weaken the flailing economic recovery.
From The Atlantic:
Often, financial sector layoffs foreshadow broader layoffs in the economy, for reasons explained here. So if these cuts are occurring because firms' expect weaker profits -- or losses -- going forward due to the economy slowing down, then these layoffs are a very worrying indicator.
But that's not the only possible reason for more layoffs. Challenger, Gray & Christmas provides a couple of other possibilities. One could be the new financial regulation. Some new rules are beginning to take effect. If they cut into profits, then banks will slash jobs.
In another very specific way, new regulation may be causing layoffs. New compensation rules are causing labor costs to rise. Banks are increasing salaries and shrinking bonuses. If they cannot as freely utilize incentive as for compensation, then they'll have to pay the lower performers more and cut their employee pool accordingly. I spoke with a banker last night whose firm is naming this reason for its recent layoffs.