The time is ripe for Wall Street layoffs as recession looms and deals boom turns to bust

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Less than six months ago, Wall Street bankers were reaping the rewards from a historic boom in mergers and IPOs.

Now, thanks to a confluence of factors that have cast a pall over markets and caused most deal categories to plunge this year, broad-based job cuts loom for the first time since 2019, according to industry sources.

The turnaround illustrates the feast-or-famine nature of Wall Street advisory work. Firms were caught understaffed when central banks unleashed trillions of dollars in support for markets at the start of the Covid-19 pandemic. The ensuing surge in capital markets activity like public listings led to a bull market for Wall Street talent, from 22-year-old college graduates to richly compensated rainmakers.

For the first time in years, bank employees seemed to gain the upper hand. They pushed back against return-to-office mandates. They received record bonuses, multiple rounds of raises, protected time away from work and even Peloton bicycles.

But that's over, according to those who place bankers and traders at Wall Street firms.

«I can't see a situation where banks don't do RIFs in the second half of the year,» David McCormack, head of recruitment firm DMC Partners, said in a phone interview. The word «RIF» is industry jargon meaning a «reduction in force,» or layoffs.

The industry is limping into the traditionally slower summer months, squeezed by steep declines in financial assets, uncertainty caused by the Ukraine war and central banks' moves to combat inflation.

IPO volumes have dropped a staggering 91% in the U.S. from a year earlier, according to Dealogic data. Companies are unwilling or unable to issue stock or bonds, leading to steep declines in equity and debt capital markets