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Morning Coffee: The 2017 pre-bonus job cuts have begun and they're happening here. Why firms reject you unfairly

When banks announced bonuses at Christmas, any extra staff were dismissed in December. Now that bonuses are announced in January, surplus staff are dismissed early in the New Year. Now is the time when the pink slips fly.

Last week, Morgan Stanley became the first bank to pull the trigger on 2017 pre-bonus layoffs. Bloomberg reports that the U.S. bank "terminated salespeople and traders" as part of its annual performance review process. It's not yet clear how many people have gone, or who they are, but it's clear that some of the Morgan Stanley staff who thought they'd be picking up their bonuses at the end of this month won't be picking them up after all.

The rationale for the cuts is perfectly clear. Morgan Stanley's equities sales and trading division saw revenues decline 6% in the first nine months of last year compared to the same period of 2015, and the bank has reportedly cut the equities bonus pool by 4% in response. The fewer people who have a claim on the diminished pool, the more there'll be to go around.

Morgan Stanley isn't the only bank cutting bonuses for its equities staff. Bloomberg reports that Bank of America is doing much the same, in cutting its equities bonus pool by 5%. However, this won't be sufficient to offset the 12% decline in equities revenues at BofA during the first nine months of 2016, as shown in the chart below. Moreover, if Morgan Stanley and Bank of America are cutting bonuses (and staff) in equities, what does this say about the prospects for equities divisions in European banks like Barclays?

Separately, you don't want to apply for a prestigious job if you're perceived to be a lower class male. This is the conclusion of the latest research by academic Lauren Rivera, previously known for her detailed studies into elite hiring patterns at U.S. investment banks and consulting firms.  

Rivera's most recent target was large law firms. After creating four fake student identities (a lower class man and woman and an upper class man and woman) based around surnames (Clark/Cabot) and leisure activities (polo/soccer) and applying for law firm traineeships, Rivera discovered that upper class men are far more likely to be called in for interview. As the chart below shows, 16.25% of the candidates perceived to be upper class males in Rivera's test were called for interviews, compared to just 1.28% of candidates perceived to be lower class men.

Curiously, law firms were more willing to interview women perceived as lower class than those perceived as upper class. The comments law firms made to Rivera suggested that this was because upper class women were expected to become stay-at-home mothers, while lower class women were considered harder workers and expected to continue working (hard) even after motherhood.

Interviews by class


12 20-somethings in hedge funds who will highlight all your inadequacies. (Business Insider) 

Hedge fund wunderkind thinks liberal arts majors are the best hires: "Students of history and literature are more trained to understand the existence of multiple perspectives and to engage with them, and so can often more accurately understand the human dynamics that drive stock market flows." (Business Insider) 

Good luck joining a start-up hedge fund: launches are at their lowest level since 2008. (Financial Times) 

A Barclays analyst thinks Credit Suisse shares will rise by 13% from this point. (Barrons) 

Donald Trump needs to be nice to Wells Fargo. JPMorgan Chase. Fidelity Investments. Prudential PLC. Vanguard Group: they all own his debts. (Atlantic) 

Britain's intelligence agency, GCHQ is hiring (again). (IB Times) 

Reasons to move to Milan: "Multinational executives from top banks relocating to Milan will get 50% of their salary tax free for five years." (Financial News)

We're emerging from the largest bond bull market in all of history. That doesn't bode well for what comes next. (Bank Underground) 

The most disappointing people under 30: 'After a month at a Zen silent-meditation retreat, Heller went back to his job at Goldman Sachs as a commodities trader in oil and gas.' (New Yorker)


AUTHORSarah Butcher Global Editor

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