The job market has generally tightened on Wall Street since the 2008 financial crisis, when market chaos and recession forced the industry to adjust.
Many Wall Street workers will see their pay stay flat or decline this year, as big banks and money managers continue to cut costs, according to a report on Tuesday by compensation consultancy Johnson Associates.
Those in equities trading and underwriting will be hardest hit, with annual pay packages down 10-15%, Johnson Associates predicted. Bond traders and traditional asset managers can expect reductions of 0-5%, with dealmakers and private bankers facing flat pay.
The job market has generally tightened on Wall Street since the 2008 financial crisis, when market chaos and recession forced the industry to adjust. But now there is a peculiar dynamic, where pay can fall even when the economy is strong, said Alan Johnson, who runs the consultancy.
“This is kind of an inflection point,” he said. “It used to be, ‘As long as AUM is up and as long as the market is up, you’ll be fine.’ But that’s no longer true.”
AUM refers to assets under management.
Pay is under pressure because of increased competition and automation. As an example, Johnson pointed to index funds that simply track the market but cost less and perform better than funds handled by human portfolio managers. As investors demand more for a lower price, firms have been reducing headcount and squeezing pay.
The dynamic has been showing up in some quarterly results.
Morgan Stanley’s compensation expense for the first six months of 2019 fell 13% compared with the same period in 2018. That figure dropped 12% at Goldman Sachs Group Inc and 2% at JPMorgan Chase & Co’s investment bank.
The Johnson Associates report is based on the firm’s work with 16 major banks and asset managers that are not named.
The only areas where employees may see a pay bump this year are private equity, hedge funds and traditional lending, according to the report. Those workers could see pay rise 0-5%.
Although fewer are bringing home massive paychecks, Wall Street still rewards top performers, Johnson said. Those who create new products, maintain strong ties with clients and outsmart rivals are particularly valuable.
“Firms want to be efficient and have a motivated workforce,” he said. “There’s a huge focus on paying the very best people.”