The headline on a top story in The New York Times today reads: “Wall Street Hiring in Anticipation of an Economic Recovery.” And here are the summary paragraphs:
The shift [towards hiring] underscores the remarkable recovery of the biggest banks and brokerage firms since Washington rescued them in the fall of 2008, and follows the huge rebound in profits for members of the New York Stock Exchange, which totaled $61.4 billion in 2009, the most ever. Since employment bottomed out in February, New York securities firms have added nearly 2,000 jobs, a trend that is also playing out nationwide at financial companies, commodity contract traders and investment firms.
Though the figures are small in comparison to overall Wall Street employment, executives, economists and headhunters say they expect the growth to pick up steam in the coming months.
“I think we’re seeing some hiring in anticipation of better times,” said Rae Rosen, a regional economist at the Federal Reserve Bank of New York. “Wall Street typically hires in anticipation of the recovery, and there is a sense that the economy has bottomed out and is slowly improving.”
But the headline elides the point of the article. Granted, Rae Rosen believes that Wall Street is hiring in anticipation of better times. But the article, and the data, show that times are already pretty darn good.
The Wall Street firms that made it out of the credit crunch and the financial collapse alive are doing just fine, in fact. They have less competition from companies like Lehman Brothers and Bear Sterns. That means more profits.
They also are benefiting handsomely from low interest rates. It is Banking 101: Wall Street firms borrow billions from the government for close to nothing, lend it out and make money on the margin. That means more profits.
Companies like Goldman Sachs are more profitable now than they were in the boom years. That, really, is why they are hiring — not because they are betting on a strong economic recovery. They are making money hand-over-fist despite the fact that the rest of the economy is ailing terribly, and only starting to turn around.