Think Wall Street's Trimmed? Think Again

Despite a flood of layoff announcements, headcount in the U.S. securities industry continued to creep upward in the second half of last year, official figures show.

In fact, seasonally adjusted monthly data from the Labor Department shows that securities industry employment climbed in every month of 2007 and set a new record high each month from June through December.

The preliminary year-end total of 850,900 employees was 6,500 above the June figure, and was 7,700 above the previous cyclical peak of 843,200, set in March, 2001.

That seems to fly in the face of headlines that give the impression the industry quickly slimmed down as the mortgage and credit crisis ravaged profits and balance sheets. It's hardly good news for those who believe the worst of the job-cutting is past. The same data show the industry shed a cumulative 91,400 jobs, or 11 percent of the total work force, during the last cyclical downturn from March 2001 to October 2003.

The non-seasonally adjusted figures show that monthly employment in the securities industry declined four times during 2007, including September and December. Still, the pattern closely matches the seasonally adjusted data. Industry employment on a non-seasonally adjusted basis set a record high in November and gained 5,700 over the second half of 2007.

It's well known that employment is a lagging indicator of economic conditions. In a report this month, London-based Citigroup equity analyst Jeremy Sigee pegged the lag for the securities industry during the previous cycle at between six and 12 months.

The Citigroup report says the previous cyclical employment peak came 12 months after the revenue cycle peaked in 2000. Employment in securities troughed during 2003, six to 12 months after revenues bottomed, according to a description of the report in Financial News.

Citigroup said managements might refrain from cutting jobs if their bottom-up outlook remains bullish. On the other hand, they might hold back because they fear that such a negative signal could prove self-fulfilling, and would thus needlessly create a downturn, Sigee says.