Midlevel Finance Jobs Leave Wall Street as Firms Cut Costs

[M II A II R II K]

Financial Giants Are Moving Jobs Off Wall Street


July 1, 2012

By NELSON D. SCHWARTZ

Read More: http://www.nytimes.com/2012/07/02/bu...osts.html?_r=1

New York’s biggest investment houses are shifting jobs out of the area and expanding in cheaper locales in the United States, threatening the vast middle tier of positions that form the backbone of employment on Wall Street. The shift comes even as banks consider deeper staff cuts here, which could undermine the state and city tax base long term.

- “Places like New York or London will remain financial centers, but most of the players are taking a much harder look and asking whether they can move large numbers of jobs,” said James Malick, a partner at the Boston Consulting Group who advises banks on relocation. In addition to higher taxes in the New York region, employers face real estate and labor costs significantly above the national average. Consultants say they have seen a sharp pickup in this trend, known as near-shoring, as opposed to offshoring overseas.

- “Some functions need to stay in the United States, but they don’t need to be in New York City or near the client,” Mr. Malick said. And with most investment giants facing anemic revenue and more stringent regulation that cuts into trading revenues, relocation is more tempting than it was before the financial crisis. Low-level jobs have already migrated to call centers and back offices overseas, while top-end traders and bankers are secure in the New York area, experts say. Instead, services like accounting, trading and legal support, and human resources and compliance are being shifted to places like Salt Lake City, North Carolina and Jacksonville, Fla.

- The potential shift has profound implications for New York’s tax base and economy because of Wall Street’s outsize financial profile. Last year, the industry contributed 14 percent of New York State’s tax revenue. After peaking at 213,000 in August 2007, securities industry jobs in the state fell more than 15 percent in the wake of the financial crisis, according to the Bureau of Labor Statistics. Since then they have risen nearly 12,000, but at 191,200, employment is well below pre-crisis levels. By contrast, over the same period, Delaware gained 1,300 securities jobs while Arizona picked up 2,600.

- The federal government does not specifically track securities jobs in Utah, North Carolina or Florida, popular locations for near-shoring. But data from firms illustrates the trend. Since the end of 2009, Deutsche Bank’s work force in the New York area has fallen to 6,900 from 7,400 even as its staff in Jacksonville rose to 1,000 from 600. Credit Suisse’s staff in the New York region has dropped by 500 in the past four years, but the firm has added 450 positions in North Carolina’s Research Triangle, in the area of Raleigh, Cary, Durham and Chapel Hill. And last year, Bank of New York Mellon cut 350 jobs in New York City while hiring 150 people in Lake Mary, Fla.

- “Even as the securities industry goes through a difficult time, New York remains the financial capital of the world and I don’t see that changing anytime soon,” said Thomas P. DiNapoli, the New York State comptroller. But regional offices perform more and more of the sophisticated work usually associated with Wall Street and nearby trading hubs like Jersey City and Stamford. This parallels a shift in some technology jobs away from Silicon Valley to Portland, Ore., and cities in Texas, said Michael Shires, a professor at the School of Public Policy at Pepperdine, who prepares an annual ranking of the best cities for employment.

- The erosion of middle-tier jobs in the financial sector is not limited to New York. In a presentation to analysts in late May, the president of Goldman Sachs, Gary Cohn, described what he called the firm’s “high-value location strategy.” By looking outside hubs like New York, London, Tokyo and Hong Kong, he said, the firm could save 40 percent to 75 percent on job-related expenses. Over a third of Goldman hires in 2011 and 2012 have been in cities like Bangalore in India, Salt Lake City, Dallas and Singapore, Mr. Cohn said. Utah, with looser regulation and lower taxes than New York, has been a particular area of growth for Goldman. While Goldman’s work force in the New York area has been flat since the end of 2009 at just over 10,000, full-time employees in Salt Lake City have doubled to 1,400, making that office Goldman’s sixth-largest globally.

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[eternallyme]

Eventually those places mentioned will be seen as too expensive and they will end up in China or India. Sad, sad indeed.

[pesto]

Originally Posted by eternallyme

Eventually those places mentioned will be seen as too expensive and they will end up in China or India. Sad, sad indeed.

Probably about right. But no one forced NY to have high taxes and excessive regulation.

In any event, removing jobs that are low value add from areas in high demand is what the market is all about. Without this pressure, Manhattan would still be full of farms and large manufacturing facilities. Better to get rid of low value add jobs and make room for higher uses.

[Doady]

With improving telecommunications technologies, it is less essential for all office functions to be located in the same place, so some jobs get moved to the suburbs where rents are cheaper.You probably see a lot of this sort of thing in any healthy and vibrant downtown where the demand/cost for land is very high. It's the same reason you see manufacturing in the suburbs and not the inner city. But this article talks about jobs moving out of metropolitan area altogether. That seems a bit weird.

[Hayward]

I have to wonder though if some of these job relocations are desperate measure techniques to cut costs. In other words, when the economy improves, jobs numbers will go back up in NYC.

[ardecila]

Might I suggest that this is a good thing for our country? I've never liked the fact that so much innovation and capital was locked away in a small number of elite cities. Boo hoo for NY's loss of tax revenue.

I just hope the new jobs being created will enrich the cores of those second-tier cities and not suburban office parks.

Seems like the Midwest keeps getting screwed over, though. Sunbelt and mountain west... no love for Minneapolis or Cincinnati.

[Jelly Roll]

Originally Posted by ardecila

Might I suggest that this is a good thing for our country? I've never liked the fact that so much innovation and capital was locked away in a small number of elite cities. Boo hoo for NY's loss of tax revenue.

I just hope the new jobs being created will enrich the cores of those second-tier cities and not suburban office parks.

Seems like the Midwest keeps getting screwed over, though. Sunbelt and mountain west... no love for Minneapolis or Cincinnati.

It is possible but reading the article it seems like most of the former employees wanted to stay in New York and just got new jobs instead of moving locations. It will be interesting to see how this affects recruiting for the firms that choose to move these positions to other cities. The top talent is going to have job offers and many want to be in NYC. I think this could potentially backfire if the top talent go to the firms that keep the jobs in NYC.

[Hayward]

Originally Posted by ardecila

Might I suggest that this is a good thing for our country? I've never liked the fact that so much innovation and capital was locked away in a small number of elite cities. Boo hoo for NY's loss of tax revenue.

I just hope the new jobs being created will enrich the cores of those second-tier cities and not suburban office parks.

Seems like the Midwest keeps getting screwed over, though. Sunbelt and mountain west... no love for Minneapolis or Cincinnati.

Well, I'd rather see net growth in jobs elsewhere instead of a reshuffling of the deck.