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The financial services industry in the United States and Europe is still reeling from the financial crisis, shedding tens of thousands of jobs each month – even a year after the crisis hit its apex.
However, recent evidence suggests that the financial services industry in Asia – particularly China, which was largely isolated from the toxic assets that caused the crisis – is starting to rebound.
Indeed, many global financial firms are picking up hiring in Asia even as broad unemployment continues to rise. The reason: These financial firms want to be most active in the region of the world that has the best potential for growth, as well as the best opportunities for profit.
“The death of the industry has been greatly exaggerated,” Matthew Hoyle, founder of Matthew Hoyle Financial Markets, a Hong Kong-based headhunter for the banking and hedge fund industries, told the New York Times. “I am actually quite excited about the prospects for the rest of the year,” adding that “Things have picked up here — unlike in Europe and the United States, where that’s absolutely not the case,” he added.
Financial firms slashed 19,000 jobs in August – the 21st consecutive monthly drop for the industry, according to payroll processing firm Automatic Data Processing (ADP). The finance and insurance sector has shed 332,000 jobs since the recession began in December 2007. And the losses will likely keep piling on.
Labor Department data set to be released today (Friday) is expected to show the U.S. unemployment rate surged to 9.6% in August after dipping to 9.4% in July. From December 2007 to July 2009, the economy as a whole shed 6.7 million jobs.
“There’s a gradual improvement in labor markets underway in the sense that the monthly losses are diminishing,” said Joel Prakken, chairman of Macroeconomic Advisors LLC and an ADP spokesman. “The disappointing news it that we have several more months to go of job losses.”
There’s a similar story unfolding in Europe, as well. The unemployment rate across the 27 European Union countries rose to 9% in July from 8.9% in June, while the unemployment rate for the 16 countries that use the euro jumped to 9.5%, according to Eurostat.
As in the United States, many of the job losses have been sustained in the financial services sector. European banks and financial firms have cut 140,000 jobs since the third quarter of 2007, according to data compiled by Bloomberg.
About 84,000 European finance jobs are expected to hit the chopping block this year, according to a recent report by City of London Corp. That’s nearly ten times the number of finance jobs the region lost in 2008.
As the Europe’s largest employer of financiers, the United Kingdom will be most affected. It is expected to lose up to 35,000 finance jobs this year.
Employment at British, French and German financial services firms won’t return to its early-2008 highs until at least 2013 the report said. Even then, the United Kingdom will have 10,000 fewer finance jobs than it did in 2008.
The EU financial services industry employed about 1.4 million people and was worth about $315 billion (219 billion euros) at its peak in 2008, according to City of London. However, the entire industry will shrink 6.2% in 2009 and not return to growth until 2011.
“I’m fairly optimistic on the financial sector returning to profitability, but that won’t necessarily feed through to dramatic employment growth,” Alistair Milne, a senior finance lecturer at London’s Cass Business School, told Bloomberg.
Financial firms will be focused on “growth efficiency” over the next four years and “earning money out of the staff they’ve got at traditional businesses” such as fixed income, equity trading and derivatives trading, Milne said.
Asian Growth a Beacon for Financial Firms
While the financial services sectors in the United States and Europe continue to shrink, finance firms operating in Asia are already rebuilding.
Standard Chartered Bank said last month that it would recruit 850 bankers in the next 12 to 18 months. The majority of those hires will take place in China, but significant numbers will also to be added in Singapore and Malaysia.
"We have aspirations to double the industry growth rate and double our customer numbers in three years,” Foo Mee Har, Standard Chartered's global head of premium banking, told the Telegraph.
Household wealth in Asia, outside Japan, was expected to grow by 12% annually until 2012, she added.
Meanwhile, HSBC Holdings PLC (NYSE ADR: HBC) said last week that it is recruiting more than 100 staff members in Hong Kong, and it plans to add 1,000 employees in mainland China this year.
Vincent Cheng Hoi-chuen, chairman of HSBC's Asia-Pacific unit, even said that his company hopes Shanghai will grow into a financial center that rivals Hong Kong.
“I sincerely hope that Shanghai will become a financial center, as China is able to have two centers, given its size," he said. "There should be enough capacity for companies to list in both or either market at the same time, despite more and more companies planning to go public in the capital market."
And Australia and New Zealand Banking Group, which competes with Standard Chartered, expects to increase its staff in the retail banking business in China more than 10-fold to over 500 by 2012. The company is currently moving ahead with a plan to open more than 20 branches in the country by 2012, up from three currently.
In addition to these recently released plans:
- Bank of America Corp. (NYSE: BAC) added five senior staff to its Asia Pacific Commodities team and JP Morgan Chase & Co. (NYSE: JPM) added seven members to corresponding Asia commodities unit.
- Credit Suisse Group AG (NYSE: CS) added nine specialists to its Asia sales and trading business. (Credit Suisse’s Asia-Pacific operations are on track to contribute 25% of the firm’s total revenue in coming years.)
- And Citigroup Inc. (NYSE: C) said it plans to expand its commodity team in Asia at a “double-digit” pace in a bid to capitalize on rising demand for raw materials.
“Asia will be the biggest contributor to growth in commodity consumption,” Ananth Doraswamy, regional head of commodities, told Bloomberg in an interview from Singapore. “We will need more people in energy trading and metal sales, as well as agricultural products.”
A survey by Singapore-based recruiting firm Robert Walters showed that job advertisements in Hong Kong, Singapore, China and Japan jumped 6.4% in the April-June quarter from the three months prior, the New York Times reported.
That’s not surprising considering that unemployment in Hong Kong, Singapore, and Japan – at 5.4%, 3.3%, and 5.7% respectively – are still relatively low when compared to the United States and Europe. And while unemployment is still an issue in China, that country’s economy expanded by 7.9% in the second quarter, exceeding most analysts’ expectations, and lending credence to Beijing’s goal of 8% annual growth.
Indeed, the finance industry seems to have found greener pastures in Asia, where economic growth is still taking place.
“Asia is seen as a growth market,” Robert Walters’ Mark Ellwood told The Times. “Companies are not going out all guns blazing again, but there is once again an appetite to hire in certain areas.”
News and Related Story Links:
- New York Times:
Finance Jobs Hint at Recovery in Asia
Finance Jobs Won’t Return Before 2013, Report Says
- City of London Corp:
European financial services industry ‘will play crucial role in economic recovery across the EU’
Standard Chartered to hire 850 bankers
- The Standard:
HSBC bets on Shanghai as financial center
Citigroup Seeks ‘New Blood’ for Asian Commodity Team