Working on Wall Street always meant great pay, fabulous perks and year-end bonuses that would make you feel as if you'd won the lottery. But that was before the Great Recession. Now, unemployed traders and bankers are finding out that high-paying jobs are nearly impossible to come by, as layoffs and slow economic growth continue in the finance sector.
Karen, a New York-based fixed income trader, knows this firsthand. She recently spent six months searching for a job in the finance sector and ended up accepting a position that pays 40 percent less than what she was making.
"You don't have the upper hand anymore," she says. As a vice president at her former firm, she says she was accustomed to base salaries ranging from $110,000 to $150,000.
Heidi Shierholz, labor economist with the Economic Policy Institute, says after holding up pretty well in the first year of the recession, there's a very clear trend that growth in nominal wages -- those wages that are not adjusted for inflation -- has slowed dramatically in the last few years.
"That's the scary part. Employers don't need have to pay a wage premium to get and keep the workers that they need, when there's dozens of workers waiting to get jobs," she says.
In Karen's case, the layoff meant lifestyle changes. After upgrading to a one-bedroom apartment, she was forced to downsize to a studio and has cut back significantly on expenditures like going out to dinner and traveling. But it was the lack of job prospects that was particularly jarring. "I did have a lot of sleepless nights, especially on Sunday, knowing that it was another week," she says.
And the ranks of the sector's unemployed are expected to grow. Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group, recently told Bloomberg Radio that her firm sees 80,000 layoffs coming in the sector over the next 18 months.
The Labor Department reported Friday that U.S. jobless claims rose by 95,000, with the unemployment rate holding steady at 9.6 percent. Most of the losses were in government, but that's little comfort to people elsewhere: A mere 64,000 private sector jobs were created.
Job Market: It's Tough Out There
"It's bad," says Heidi Shierholz, labor economist with the Economic Policy Institute, noting that September was the fifth straight month of meager private sector jobs growth. According to outplacement firm Challenger, Grey & Christmas' September job cuts report, plans for only 125 financial jobs were announced during the month.
Even though she had solid industry contacts, Karen says even landing a lower paying job was difficult. "[Jobs] were very scarce. "You'd apply for jobs and not hear back for a while. It was a very lengthy process," she says -- was markedly different than just two years ago, when she was laid off by an investment bank and hired by a competitor in one month.
"I didn't even file for unemployment," says Karen, who was let go the week before Thanksgiving in 2008 and was working by Christmas.
Christopher J. Shea, founder of Cross Hill Partners, a New York-based recruiting firm, says after a pickup earlier in the year, he's seen a pullback in hiring, and more employers focusing on performance-based compensation. "We're going to give you a lower base and put more on your performance," Shea says firms are telling those they do hire.
But Shea says this pay structure bodes well for candidates who have confidence in their skills; they could actually end up making more money if they opt for a higher commission rate and lower base.
Despite slow improvements, unemployment is expected to remain high for the next several years. Shierholz says she expects the unemployment rate to hover around its current rate for a year, and says it could take up to five years for the unemployment rate to return to its pre-recession levels in the 5-percent range.
"You need about 100,000 jobs [added] just to hold the unemployment rate steady to keep up with population growth," she says. "Since the spring, it's been a slough."
The scarcity of job opportunities has made even top talent at companies skittish about entertaining offers from competitors. Shea says even though the old adage, "It's easier to find a job when you have a job may be true," it doesn't necessarily mean that the employed workers are looking for greener pastures.
"In an uncertain market, people are sticking with their employers," he says of workers that worry about it being harder to re-plot themselves if a new opportunity doesn't work out.
But for those that do find themselves displaced by a layoff, Karen recommends focusing on the positive.
"You have to have a lot of patience and try to enjoy some of the time off," she says.