Monitoring the pulse of the City job market

In an online poll of bonus expectations Morgan McKinley found that 34% of respondents anticipate an increase of over 65% in their annual bonus payment. On average the expectation across all sectors of the City jobs market is that bonuses will be 35% higher than in 2003. This optimism would appear to be based on the stronger financial markets especially earlier this year, and particularly in fixed income and derivatives. (see chart 3)

Ken Brotherston, Chairman of Morgan McKinley comments:
ìBonus expectations in the City are running high this Christmas and while top performers will always be rewarded, the majority of those expecting big increases are likely to be disappointed. Business conditions in the City are more muted than they were earlier this year, and while the City is in good shape and bonuses will be healthy, 2004 is not going to be the bumper year some are hoping for.î

City Salary offerings see a short term decline but the long term trend is firmly upwards

City salary offerings have decreased by an average of 7.6% to 43,872 from Septemberís figure of 47,483 pa. (see Graph 1), with the biggest reductions occurring in the lower and middle sectors of the City jobs market. Middle market professionals (e.g. Financial Controllers, Junior Analysts and Product Controllers) now command an average basic salary of 39,307, whilst administrative and support staff can expect to be offered an average salary of 26,840. The average salary
for those seeking senior professional/director roles is 65,468.

The reduction in salaries this month reflects a tail off in recruitment across the City since the end of September. This is due to a mix of both seasonal and market factors. As the bonus season approaches employees prefer to remain in situ until bonuses are paid. Staff turnover is therefore lower than in the first half of the year and is driving down recruitment levels in the short term. As supply of candidates in the post-summer season outstrips demand employers are inclined to offer lower salaries to potential employees. A similar pattern emerged in September and October 2003 (see Graph 1).

The approach of the financial year end is also placing downward pressure on salaries as recruitment budgets are now considerably depleted since the start of the year. The curb in appetite for hiring is also reflected by a widespread increase in the time taken to sign off new hires.

Despite the short term cool-off in hiring, the long term salary trend has been firmly upwards with increases of 0.42% and 12% for middle market professionals and administrative/support staff respectively over the last 12 months. Salaries for senior professionals/directors have remained relatively stable as expectations of higher bonuses have enabled City employers to fill new vacancies without necessarily raising base salaries.

Morgan McKinleyís half yearly in-depth salary survey reveals there has been a high demand for corporate finance and M&A analysts over the last six months. A shortage of younger analysts due to cutbacks in graduate hiring over recent years has resulted in increases in basic salaries of between 20-40%. Basic salaries for analysts with 0-2 years experience now average between 30,000 and 40,000.

Recovery finally began in asset management at the beginning of 2004 and has continued all year after recent years of decline. Asset management was the last sector of the City to weaken but has been one of the slowest to revive. The strong demand for staff in the first half of the year has resulted in higher salaries.

The back office, an area hit particularly hard in retrenchment times, has also experienced widespread recovery in 2004 as organisations across the City stepped up recruitment this year.

The number of outstanding City vacancies stood at around 9837 in October, up 7% on Septemberís figure and 106% on the 4766 jobs outstanding in October 2003.

The number of new City jobs coming onto the market in October was down slightly (by 6%) on September (see Graph 2). The slight fall over the month from 4851 new jobs in September to 4536 new jobs in October is mostly due to a curb in employersí appetites for hiring. Although the City has experienced strong recovery throughout 2004, hiring levels have now begun to tail off after a period of rapid recruitment to the end of September. Employers are now more cautious and are not hiring as strongly as they did in the first half of the year.

Number of days taken to secure a position

This month saw a sharp increase in the amount of time it takes for a candidate to secure a position, rising from an average of 60 days in September to 100 days in October (see Graph 4). As a consequence of the end of year cool down in recruitment, the supply of candidates is outstripping demand and it is taking candidates longer to secure a role. The increase is also due to a backlog in existing employees awaiting bonus payouts before they commit to a new position.

October saw an upturn in new candidates reflecting the start of the post-summer period where people turned their attention to considering their job situation and began looking for new positions. Those with bonuses being paid at the end of December were able to begin their job search in October, knowing that they could collect their bonuses before accepting a new position. The arrival of recent graduates and newly qualified accountants on the market in October has contributed to the rise in the time taken to secure a position. It has also had a dampening effect on salaries by increasing the supply of candidates in the market at a time where demand for new recruits is temporarily slowing.

Ken Brotherston comments:

ìThis month a number of factors have combined to create a temporary, seasonal cool down in the City jobs market. However, early indicators point to a strong outlook for City recruitment in the New Year and beyond.