The turmoil that is shaking Wall Street to its core could eventually go down as the worst financial crisis in American history. We are already hearing comparisons of the current situation to the bank failures and stock market crash that ignited the Great Depression in the 1930s.
While we will have to wait to see the full historical impact of the credit market collapse on the economy, one thing is already certain: the crisis has reaped a heavy toll on financial sector jobs, leaving tens of thousands unemployed and with little hope of re-employment in the same line of work.
Since August 2007, when the collapse began in earnest, financial institutions have announced nearly 200,000 job cuts. This year, job cuts in the sector have reached 103,000 through August. When the dust settles from the most recent flurry of bank closings, seizures and rescues, we could see another surge in layoffs, which would probably push 2008 job cuts beyond last year’s record total of 153,105.
Unfortunately, the job cuts are not isolated to those who created this situation. They impact everyone, from the fund managers and traders to human resources professionals and administrative assistants.
The big question on the minds of the newly jobless: what now?
Many will remain in the investment banking industry. Some think this recent crisis will bring an end to the type speculative investing that created this crisis. While Wall Street as we know it may be irrevocably altered by this crisis, the fact is that an investment-based credit market is the backbone of economic expansion. Without it we would not have new innovative companies like Google and won’t be able to fund the next generation of innovators in technology, alternative energy or health care.
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Demand for the displaced investors, traders and bankers will still exist. They may have to adjust their expectations when it comes to income and they will have to get used to increased regulation and transparency, but plenty of opportunities will exist, if not immediately, then at some point in the near future when the aftershocks of this crisis subside.
For those outside of the financial services end of the business - i.e., human resources, IT, marketing and communications, administration - the opportunities may be even more plentiful. Unlike investors and traders who have very specialized skill sets unique to financial services, these other workers have skills that can be transferred to any industry. They can target areas that are less vulnerable to this downturn, such as health care, energy, telecommunications and education.
Even some of the displaced workers on the financial side will find opportunities outside of the industry. Some will go work for companies and organizations with a need to raise capital. Others may end up as regulators, consultants, analysts and lobbyists. Many could end up as entrepreneurs, igniting another period of heavy start-up activity rivaling that of the dot.com era.
Eventually, the financial sector will stabilize and begin another period of expansion. Until that happens, those who lost their positions will have to channel their intelligence, drive and desire to make money into new opportunities and endeavors, which, in the end, may prove to be the very thing this economy needs to right itself.
(John A Challenger is chief executive officer of global outplacement and business coaching consultancy Challenger, Gray & Christmas.)