posted 25th November 2022
The Financial Services Job Market in the US Has Changed
The tech job market in 2022 has been remarkably buoyant - but has that been a good thing for financial service institutions?
Even considering the two years that came before it, there are still likely few who might describe 2022 as comparatively uneventful. For the financial services sector in the US, this has translated to dramatic and frequent shifts. Where the COVID-19 pandemic brought hiring to a near halt, we have since seen a remarkable recovery. Hiring needs have increased, with pay inflation reaching near-record levels and tech talent shortages making the job of hiring a significant challenge.
Many have described the market in 2022 as "candidate led" - where a dramatic increase in the demand for talent coupled with a significant shortage of the talent in question has shifted much of the bargaining power to candidates and away from clients.
In the final quarter of 2022, the economy seems to finally have cooled - but has this, in turn, impacted the current candidate led market?
In short, the answer is no - or at least, not yet, and certainly not in the tech industry. We are seeing very little remedy to the talent shortages which already exist. Compounding this is the influx of FinTech companies and other companies operating within similar spaces. Where 'financial services' used to refer to a comparatively small group of companies, now there are a much larger and ever-growing landscape of companies who are all competing for the same talent. Where these companies will often look to invest in cutting edge technology the demand for niche skill sets becomes even higher.
And financial services firms are trying to invest in their tech. The market has seen a rising demand for Artificial Intelligence and Machine Learning skills, for instance, to assist with data analysis and investment decision making. There has been a significant increase too in demand for Cloud engineers, Full-Stack developers, and UX/UI experts.
Much of the bargaining power has shifted away from clients and towards candidates, where the demand for talent has exceeded the talent available in the market.
The financial services sector has encountered some real difficulties with this. Tech workers are increasingly moving away from traditional investment banks and towards large tech companies, who are often willing to pay much higher salaries - financial services used to attract the best of the best, but this doesn't seem to quite be the case anymore. Attempts to take candidates from tech companies and move them over to financial services institutions are challenging too, with workers from Silicon Valley commanding salaries far beyond anything the market has seen before.
The actual economy also does not seem to be having much of an impact on hiring yet - which is atypical, as in previous economic downturns, it has been clear that the success of the economy and levels of hiring are closely linked. Recessions typically indicate layoffs - and whilst this has likely been the case in some markets, for technology, we are yet to see much of this happen at all. Instead, salaries continue to inflate, and companies continue to hire.
The hiring practices in the Financial Services sector need a refresh
Although it was an initiative that began well before the COVID pandemic, it seems there has also been significant acceleration in growth of cities outside of New York. Miami, Dallas and Austin have all seen an increase in presence of job opportunity. Engineering teams are being increasingly moved out of New York across all sectors. Texas, for instance, is appealing, thanks to its lack of state tax and lower governance on employee rights.
Major cities outside of New York have experienced impressive increases in job opportunity, which has tightened the skills market even further.
Tech roles within technology firms in these lower-cost cities have begun offering a parity in base salaries to their New York counterparts to help attract talent. Where the cost of living is so much less in these cities than New York and companies native to these cities often cannot offer similarly competitive salaries, candidates often end up in ultimately much better financial situations than they would be in New York City.
Larger banks, on the other hand, have yet to adapt to this new method of attracting talent, thereby yet again often losing talent to tech companies, rather than rival banks.
Beyond this, as recruiters, we can struggle with the pace of hiring in larger banks. These clients have yet to truly adapt to the reality of talent shortages in the market and instead have continued to conduct many rounds of interviews over the course of three to six months. This lag can result in candidates becoming disengaged - particularly when significantly faster-moving opportunities present themselves in the meantime.
There has been hesitation to truly overhaul processes to adapt to the market, particularly as many hirers are still waiting to see if the market will swing back towards a more client-led landscape.
Remote working hasn't gone away
Following the COVID-19 pandemic, remote working has become much the norm. We are increasingly seeing, particularly in technology jobs in finance in the US, a desire for fully remote roles over hybrid ones. For many investment banks and financial service institutions, this is becoming another candidate-led issue that needs to be adopted to successfully attract and retain talent. Candidates may even ask for extra money if they're expected to go into the office on a hybrid or full-time basis.
There is a concern, however, that this trend might ultimately be detrimental. Already, much has been reported on how remote working can negatively affect the ability of firms to build a strong culture, or in onboarding and training of new staff. Whilst remote working goes a long way in attracting the right talent, it might ultimately create a more disjointed, potentially even less effective company, particularly where junior and mid-level candidates are concerned. Hybrid working, on the other hand, seems to alleviate many of the concerns around this - and thus, many feel that it has a lot more potential for longevity.
Will things really change?
In a world that continuously becomes more rooted in technology, some specific skills shortages are simply not likely to disappear any time soon. However - in the short term, at least, the tides may generally be turning away from the candidate-led market we've seen these past few years.
As 2022 draws to a close, Big Tech firms have been making large swathes of redundancies, with VC firms either backing away from, or tightening up their investments. The looming recession, the lower-than-expected Q3 performances and general market volatility have all contributed to an uncertain start to 2023.
But will this ultimately reduce the pain Financial Services firms have been feeling? Potentially - although maybe not to the extent that they might be hoping for. As ever, the companies able to more flexibly adapt to the market are the ones that are more capably attracting talent - and whilst what attracts talent will likely evolve and change over time, ultimately the need to do so likely isn't going away.
The Difference Engine is a recruitment and executive search firm specialising in technology. We work with firms across the United States of America and the UK.