Lehman and Merrill to pound already bloody job market

Lehman and Merrill to pound already bloody job market

Mon Sep 15, 2008 2:33am EDT
By Jonathan Spicer
NEW YORK (Reuters) - The likely disappearance of investment banks Lehman Brothers and Merrill Lynch presents a double-barreled hit to an already wounded job market, and will likely depress salaries on Wall Street.
With Lehman headed for bankruptcy and Merrill swallowed by Bank of America, two of Wall Street's four pillars have crumbled overnight.
Headhunters and consultants said the U.S. financial services sector, already suffering from a glut of unemployed talent after shedding more than 100,000 jobs this year, must now brace for up to 50,000 more.
"The resume flow will start on Monday like there's no tomorrow," said Michael Karp, chief executive at executive search and consulting firm Options Group in New York.
"This is seriously going to impact compensation this year, across the Street and all over the world as well," he said.
"The golden years of compensation in the financial services industry are over, and it doesn't help with the Bear Stearns people still looking for work."
On Sunday, eleventh-hour talks to sell Lehman failed, making bankruptcy a certainty.
At the same time, Bank of America, the second-largest U.S. bank, was wrapping up a surprise acquisition of Merrill, the world's largest brokerage, in a deal that would save Merrill from Lehman's fate.
The takeover would make Bank of America the top U.S. bank, and was likely to put 40 percent, or about 24,000 of Merrill's 60,000 non-broker employees, out of work, said Gustavo Dolfino, president at New York-based recruiting firm WhiteRock.
'BEGGARS, NOT CHOOSERS'
That, combined with Lehman's approximately 26,000 workers, will send shockwaves through the job market.
The two firms' probable disappearance would also squeeze New York City, which relies heavily on the financial services industry.
"Some of these professionals are not going to get what they usually get because they're beggars, not choosers, and they're competing with others," Dolfino said, adding there will be "a lot less money for the state and the federal government."
"We're going to ride it out, but what it truly means for the tax base is that the government will have no option than to raise taxes," he said.
Although Wall Street is not New York's biggest employer, it is the city's economic anchor. Each financial-sector worker is believed to create as many as four other New York jobs, due to their high salaries.
The year-long credit crunch has led to deficits in both the city and state budgets.
Democratic City Comptroller William Thompson said last week he was "very concerned" about the resolution of the Lehman saga, and warned it would impact New York's economy and tax revenues.
Further tremors could hit that tax base in coming months, as Lehman's undoing was expected to spark a drop in world stock markets that could push other wobbly financial companies to the brink.
The recruiters said the job losses would drive even more talent to the buy-side and to overseas countries, despite the global economic slowdown, which was spawned by the breakdown in the U.S. subprime mortgage market last year.
Karp said "hedge funds, money managers and family offices" should benefit from the job losses at Lehman and Merrill.
Dolfino pointed to the Middle East and Russia as regions hungry for U.S. financial professionals: "The demand is on the buy-side and it's international and it's opportunistic," he said.
(Reporting by Jonathan Spicer; editing by Simon Jessop)