Counterparties: The job destroying financial recovery

January 24, 2013

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Finance is in the midst of its very own jobless recovery. The money side of things is going great: the S&P 500 is at its highest level since 2007, and banks are producing astonishing profits, both dull and less dull.

Bank employees, on the other hand, aren’t faring so well. Commerzbank today announced it’s shedding up to 6,000 jobs. UniCredit is cutting 1,000 jobs in its German unit. Lloyds has announced 1,300 job cuts this month and Barclays is jettisoning 2,000 workers.

And they’re just catching up to their US competitors. Citi infamously “repositioned” 11,000 people out of work in December, while Morgan Stanley more recently decided to cut 1,600 jobs.

As Bloomberg’s Michael Moore points out, Wall Street’s bulge bracket is slimming down. UBS is ridding itself of 10,000 employees and closing its fixed-income business, while RBS is getting out of the equities, advisory, and equity capital markets businesses. It’s estimated that more than 500,000 financial sector jobs have been lost in the US and UK since 2008.

Matt Yglesias writes that glee is the wrong response to this trend:

The financial sector isn’t all moustache-twirling fatcat CEOs. Lots of people work at these banks in lots of different kinds of jobs, and nobody likes to see anyone lose theirs. But at the same time these waves of layoffs… emphasize that to a perhaps larger degree than is generally recognized, the financial sector really is shrinking.

If you still have a job in finance, then, now is maybe not the time to complain about barely getting paid more than minimum wage. — Ben Walsh

On to today’s links:

EU Mess
Spanish unemployment hits record – Reuters

The US government spends far more on healthcare than Canada (which has socialized medicine) – Matt Yglesias
Apple’s semi-soft quarter – Dan Frommer

Crisis Retro
Morgan Stanley sold a security its own employee called “nuclear holocaust” – Jesse Eisinger
“Nobody knows anything, every trade has two sides, some people are wrong ex post” – Matt Levine

Popular Myths
The biggest problem with the US deficit? It’s shrinking too quickly – Mike Konczal

“Jargon is not meaningless as long as it is strategic, measurable, and scalable” – McSweeney’s

Davos as a “positional good” – John Cassidy
“The corridors will be renamed ‘happenstance alphazones'” – FT
“The central bankers who saved the world economy are now being told they risk hurting it” – Bloomberg

No, the world is not done deleveraging – FT Alphaville

Neel Kashkari is leaving PIMCO for California politics – WSJ

Goldman Sachs not negligent in the performance of due diligence it did not perform – Reuters

A handy guide to the changes to Basel III – Economics of Contempt

Sad Declines
Union membership falls to the lowest level in 76 years – Reuters

Who wants some construction risk? – Professional Pensions

Possibly Useless Data
The Federal government owns oil and gas oil and gas worth $128 trillion (or a lot, lot less) – Marginal Revolution

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