Friday, May 9, 2008

The job destroyer

This chart is destroying thousands of jobs in the financial sector.

Over the last couple of weeks UBS, Morgan Stanley, JP Morgan, and the Royal Bank of Scotland have all announced swingeing job cuts. As the Economist reported this week, the people most at risk of taking the long walk to the front door are those working in investment banks, and especially those working in fixed-income.

As the chart suggests, several important securitisation markets are now closed. Since last summer, residential and commercial mortgage backed securities volumes have fallen off the proverbial cliff.

These securities, especially the sub prime MBS, that were behind the huge losses recently suffered by virtually all major investment banks. It doesn't help your job prospects to be working on a product that loses huge amounts of money for your employer.


  1. I *LOVE* that graph...

    What's the source for the data?

    It would be great to fill-in the last three quarters of 2007... and, if we can, quarter 1 2008. :)

  2. (Erm... at the risk of being Mr Pedantic...) Are those figures daily, monthly or quarterly? what, for example, was the total global issuance of ABS in 2006?

    The source I found puts European securitisation alone for 2006 at €481bn... or, approx. $721bn... at today's exchange rates. What proportion of the gloabl market was securitisation against European assets?

    In your graph is it the issuance or the assets which are global?

  3. asteve,

    The source for the graph is dealogic. The data was also presented in the BoE's recent financial stability report.


  4. So this is what they mean by the credit crunch.

  5. asteve,

    just noticed your other question. The data is quarterly, and the last datapoint is December 31.

    It is quarterly global issuance of asset backed securities.

    Glad you liked the chart. It is quite shocking really.


  6. Thanks, Alice... I think I should probably read the "Financial Stability Report" ;)

    Establishing that European securitisations are declining as fast as elsewhere would, I think, prove that this is not an "American problem" entirely conclusively.

  7. Anybody got further predictions about the peak-to-trough fall we expect to see as this bubble pops ?

    Looking at this I'm more inclined to think it will be about 50% in real terms.

  8. Very well presented chart.

    Have you run a chart of the City's headcount increases since 2002? I heard it's been about 12% a year. Whatever it was, I think we are headed back to the 2002 headcount.

    All those extra jobs came from worthless transaction based activities, of which you chart the MBS bubble beautifully.

    The hard truth is the real economy only needs a certain level of financial services and the headcount needed to supply it is much lower than where it is right now.

    Add in the coming collapse of the mutual fund business and I think we have a long way to go for City redundancies.

    It's a very bad time to be graduating university with a Finance degree. My company already has an unofficial hiring freeze and it's much less affected that the IBs. It's like the 2001 hiring freezes all over again.

    I'm still betting Merrill, Morgan Stanley and Lehman's go bust. Citigroup breaks into tiny pieces and JPMorgan may well implode but it's hard to see how badly the CDS explosion will hit it. An absolute ton of small service providers to the strucutured finance world are already collapsing.