The recent market turmoil, credit crisis, and subsequent drift of the American economy towards recession do not create an ideal environment for newly job-seeking graduates of the class of 2008. This is especially true for people who are hoping start their career in finance, as the confidence in investment banks has been waning after details of procedures of their oftentimes reckless transactions were unraveled upon announcing major write-down. With their confidence gone, and overall market ingenerous, the banks are finding it hard to continue their business as they used to, leading to lower revenues, lower profits, and a need for lower workforce. Bloomberg reports that the industry has cut about 83,000 worldwide over the past year. In short, I would currently not like to be looking for a finance job with a diploma on which the ink hasn’t dried yet.
But the conditions might be different by the time I will be wearing my orange-and-blue commencement robe and receiving taps on my back from my relatives. I believe that the spring of 2012 will be the ideal time for starting a career in finance, regardless whether in the United States or elsewhere in the world, as the illnesses of the economy mentioned above will disappear.
Firstly, the economic cycle should be half-way to its peak in 2012. Henry Paulson, the U.S. Secretary of Treasury, has delivered several speeches in past week, claiming that “we are closer to the end of the credit crisis that to its beginning.” Nevertheless, if it has taken the markets over ten months to reach the abyss, we can’t expect the return to normal until early in 2009. Yet stabilizing the markets won’t be the only precondition for the beginning of a growth period. Ben Bernanke is on one hand lauded for his accomplishments in handling the liquidity crisis and preventing the economy from tripping into a free fall, on the other his methods of dropping cash from a helicopter are viewed as the foundations of the recent spur of inflation. So if we take into consideration the inflation problems and add the rising prices of highly important gasoline, we’re left with a scenario that should not let the significant conjuncture begin before mid-2010. The additional two years (or year and a half, considering the 2012 graduates will start seeking jobs earlier, which is especially true for the Wall Street hopefuls) should then grant enough time for creating improved conditions on the job market.
Secondly, for the growth of the investment bank industry we will need an intensive impulse that would, even irrationally, fuel the financial markets. In the most recent previous waves we had the dot-com bubble, followed by housing bubble, and currently we’re on a brink of worshiping another phenomenon, that is green industry. As mentioned, the gas prices are skyrocketing (although not as much as in the rest of the world), creating a need for more efficient cars. The costs of energy as such as rising dramatically, given the increasing demand in the China and India, neither of whom is considering slowing down. The causes and effects of global warming will need to be addressed and curbed. We are running out of drinkable water and food is becoming increasingly more expensive. Those are just some of the issues that will preoccupy the minds of business strategists, and we will be seeing a far more intensive bull market in this industry than we are now. While it might not be desirable to fuel a creation of a bubble, the need for strategic advisory, carried out by the investment bankers, will open slots for the new graduates who will then have a chance to prove themselves. And since the prospects of the green industry are more than promising, there will be lots of work for the young analysts and associates.
And thirdly, the class of 2012 will be among the largest in history. Although the laws of supply and demand can, at the first sight, correctly imbue one into the feeling that such characteristic of a class is disadvantageous, the opposite is set to be true. As postulated above, the market conditions will be helpful towards the fresh graduates, meaning a larger number of new positions than in previous years will be made available. I presume that the distribution of students’ abilities closely resembles the Bell curve, meaning the vast majority of students is average, in other words is visibly and explicitly beatable. The students in the thinner areas below the curve will be more numerous, but also spread among more fields. We will have a larger student body that we can beat, while maintaining the relatively stable number of graduates within the fields of economics, finance or management, popularity of which is not volatile. By the time of graduation, we will have a better record and more slots open for us as the largest class. That means are expectations might really be great.
I would accept critical notes on the simplifications that are presented in the arguments. However, it can hardly be disapproved that the above will happen, and that it will lead to something else than more perspective job interviews in the field of investment banking. Perhaps the impact of the current admission rates at the top universities will be mitigated by the overall state of the economy. When fighting in the team of Gettysburgians against my peers from Harvard or Yale, that’s what I will be hoping for.
