Taylor Scott
While no job is entirely safe during a recession, some industries are more resilient than others. The financial services industry, including banking, tends to fare relatively well in terms of unemployment rates, and certain roles within banking may be more resistant to recession. Relationship-focused roles in corporate banking, investment banking, retail banking, wealth management, and financial advisory, for example, tend to be more secure due to their focus on customer connections and the essential nature of their products for businesses. Additionally, stressed asset management jobs in banks can be somewhat flexible during economic downturns as they work to recover defaulted assets. However, it's important to recognize that banks may still downsize or freeze hiring during a recession, and employees should be proactive in demonstrating their versatility and value to the organization.
| Characteristics | Values |
|---|---|
| Are bank jobs safe during a recession? | No job is truly recession-proof, but some are more prone to being obsolete than others. |
| Relationship roles in banking | Tend to be more resistant to recessions. |
| Examples of relationship roles | Corporate banking, investment banking, retail banking, wealth management, financial advisory, investor relations |
| Flow-based banking products | Provide a relatively stable stream of revenue even during recessions and depressions. |
| Examples of flow-based banking products | Trade finance, supply chain finance |
| Stressed asset management jobs | More flexible during recessions and downturns. |
| FinTech | Not recession-proof, but has seen stupendous growth in the last decade and will continue to grow slowly. |
| Large banks | Not hiring at the same levels as before. |
| Boutique and middle-market investment banks | Picking up some slack, but not enough to offset the declines. |
| Industries that are more recession-proof | Government jobs, healthcare and social assistance workers, professional and business services sector, information sector |
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What You'll Learn
Relationship roles are more resistant to recessions
While no job is truly recession-proof, some roles are more resistant to economic downturns than others. Relationship roles in banking, for example, tend to be more stable during a recession. These roles exist in corporate banking, investment banking, retail banking, wealth management, and financial advisory services.
Relationship roles in banking are more resistant to recessions because they are often more complex and require human interaction and expertise. These roles may involve managing corporate clients' financial needs, providing investment advice, or helping individuals with their banking requirements. While AI and automation may replace some repetitive banking jobs, relationship roles are more likely to remain dependent on human skills.
During a recession, banks may cut some relationship roles, but they are generally less vulnerable than supporting roles. This is because relationship managers bring in business and revenue, which is crucial for banks during tough economic times. Relationship managers in corporate and commercial banking, for instance, provide products and services that businesses need to operate, ensuring a steady stream of revenue for the bank.
In addition to relationship roles, other banking and finance jobs can also be relatively resistant to recessions. For example, stressed asset management teams in banks tend to have more work during downturns, as they focus on recovering defaulted assets. While deals and new funding may slow down during a recession, asset recovery becomes even more critical, and these teams are often more lenient about academic qualifications, focusing instead on results.
To increase job security during a recession, bankers in relationship roles can focus on versatility and adaptability. Demonstrating multiple capabilities and a willingness to take on new tasks can improve job retention. Additionally, maintaining a positive attitude and focusing on customer needs can also enhance job security. While no one can predict the future, proactively upskilling and staying committed to one's role can help relationship managers in banking remain relatively insulated from the negative impacts of a recession.
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Stressed asset management jobs are flexible
During a recession, jobs in the banking sector are at risk like any other sector. Job losses, business failures, and corporate downsizing are common occurrences during an economic downturn. However, within the banking industry, certain roles may offer more flexibility and stability than others. This includes jobs related to stressed asset management.
Stressed asset management is a critical function within financial institutions, especially during challenging economic periods. A stressed asset is a financial asset that faces challenges in generating the expected income or repayment, posing a potential risk of loss for the creditor. These assets could be loans, bonds, investments, or any other income-generating instruments where the borrower struggles to make regular payments or where the asset's value has declined significantly.
Stressed asset management jobs are inherently flexible in nature due to the dynamic and evolving nature of the work. These roles often require individuals to be versatile and adaptable. During a recession, the number of stressed assets within a financial institution tends to increase. This creates a higher demand for professionals who can effectively manage and resolve these challenging situations.
The flexibility of stressed asset management jobs lies in the diverse range of skills and capabilities they require. Professionals in this field need to have strong financial analysis skills, an understanding of debt recovery processes, legal knowledge pertaining to debt enforcement, and the ability to negotiate and work with borrowers to find viable solutions. This varied skillset makes individuals well-equipped to navigate the uncertainties of a recession and adapt to changing market conditions.
Additionally, stressed asset management jobs can provide opportunities for career growth and development. During a recession, financial institutions may seek individuals who can take on multiple roles and responsibilities. Demonstrating versatility and a proactive attitude can enhance job security and open doors to new opportunities within the organization. For example, an individual skilled in stressed asset management may be able to transition into risk management, debt restructuring, or financial advisory roles, either within the same institution or in other financial entities.
In conclusion, while no job is completely safe during a recession, stressed asset management jobs offer a degree of flexibility and stability within the banking industry. The nature of the work, which involves addressing financial challenges and mitigating potential losses, becomes increasingly important during economic downturns. By developing a broad skillset and demonstrating versatility, individuals in stressed asset management roles can enhance their job security and adapt to the evolving needs of financial institutions.
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Flow-based banking products provide stable revenue
Jobs in the banking sector are vulnerable during a recession. Layoffs, job eliminations, and hiring freezes are common as banks downsize to cope with the economic downturn. However, certain job roles in the banking sector may be safer than others. Flow-based banking products, for example, can provide stable revenue for banks during a recession.
A shift to fee-based income can help banks achieve more stable and diversified revenue streams. Banks can generate revenue from fees, loan interest, and selling financial products. Account fees, transaction banking fees, service charges, and credit card fees are some examples of fees that banks can charge their customers. By focusing on fee-based revenue, banks can reduce their reliance on interest income, which can be pressured by a high-interest-rate environment.
In addition to traditional fees, banks can leverage technology to create new revenue streams. For example, banks can charge for premium APIs that provide digital customer verification and real-time integration for SMBs to link business accounts to online accounting, tax, and expense management platforms. Banks can also generate revenue by selling customer leads via APIs to non-banks or specialized lenders in real time.
Furthermore, banks can improve their lending products by leveraging technology to enhance the customer experience, convenience, and lead management. By offering sophisticated value-added services, banks can extend existing customer relationships and generate fee-based revenue through products that deliver meaningful value to customers.
Overall, by diversifying their revenue streams and focusing on fee-based income, banks can stabilize their revenue during a recession. Flow-based banking products, such as account fees, transaction fees, and credit card fees, can provide a stable source of income for banks, even when interest income is pressured by economic conditions.
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Large banks are hiring less
While the banking sector has historically been seen as a stable career choice, even during economic downturns, the landscape is changing. Large banks are hiring less, and this is a trend that has been observed across the industry.
Data shows that only half of the biggest banks in the United States are slashing job postings, indicating a mixed approach to hiring. Some banks are cutting back on headcount in certain business areas, while others are still looking to fill thousands of new positions. This variation in hiring strategies suggests that while large banks may be hiring less overall, the impact on any individual bank will depend on its specific circumstances and business needs.
For example, Goldman Sachs needs fewer bankers in Great Britain, according to data from 2020. Similarly, Bank of America, Citigroup, and JPMorgan Chase have shown a slight downtick in worldwide job postings. However, Citigroup has increased US-based job postings by 17%, and Goldman Sachs has seen a 32% rise, indicating a shift in focus to the US market.
The variation in hiring strategies can also be attributed to the increasing digitization of Wall Street banks. While this may contribute to a reduction in staff numbers, consumer banks and US investment banks are not slashing jobs, and the biggest banks in America are still hiring. This suggests that the impact of large banks hiring less will be felt differently across the industry, with some areas, such as tech-based roles, potentially expanding while others contract.
Overall, while it is evident that large banks are hiring less, it is important to note that this does not necessarily indicate an industry-wide downsizing. The banking sector remains resilient, and opportunities are still available, particularly in the US market and for those with digital skills.
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Some businesses thrive in a recession
While recessions are challenging for most people, some businesses can not only survive but also thrive during these periods. These businesses tend to fall into three categories: those that provide essential services, those that help people save money, and those that offer affordable alternatives to higher-cost options.
Firstly, businesses that provide essential services are likely to thrive during a recession. For example, the healthcare industry is generally considered recession-proof because people still get sick and need medical care regardless of economic conditions. Similarly, grocery stores sell products that people need regardless of the economy, and residential and commercial cleaning services are often in demand as cleanliness and hygiene are essential, especially in the post-Covid era.
Secondly, businesses that help people save money can benefit during a recession. For instance, companies offering tools and materials for home improvement, maintenance, and repair projects may see stable or increasing demand as people opt to fix things themselves instead of hiring professionals. Additionally, home staging specialists may thrive as they help increase the appeal of homes in a competitive housing market, especially when people are forced to sell their homes due to financial reasons.
Thirdly, businesses offering affordable alternatives to higher-cost options can attract customers during a recession. For example, renting becomes a more appealing housing option, benefiting rental agents, landlords, and property management companies. Additionally, people may cut back on dining out and entertainment outside the home, leading to an increase in sales for supermarkets and home entertainment options.
Furthermore, certain service-based professions, such as accounting and financial advisory, can experience increased demand during a recession. As individuals and small businesses navigate financial challenges, they may require professional guidance with budgeting, debt management, and tax planning, and understanding new tax laws or government aid programs.
It is worth noting that even within industries that generally thrive during a recession, there can be winners and losers. For example, while used car dealerships may perform well, new home builders tend to struggle as bank lending tightens and demand for new homes decreases. Additionally, businesses with low overhead costs, adjustable pricing strategies, and products or services that are always in demand are better positioned to weather economic downturns.
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Frequently asked questions
While no job is truly recession-proof, some banking jobs are more resistant to recession than others. Relationship-focused roles in retail banking, wealth management, and financial advisory tend to be more stable during a recession. Roles in stressed asset management also tend to be in demand during a recession, as they help recover money for the bank.
Flow-based banking products like trade finance and supply chain finance provide a relatively stable stream of revenue, even during recessions. People still need to buy essential goods, so these roles continue to be necessary.
Large banks tend to hire less during a recession, but some smaller investment banks may be able to pick up the slack.
Government jobs tend to be more insulated from recessions, with the lowest unemployment rate among federal, state, and local government workers during the Great Recession. Healthcare and social assistance workers are also in high demand during a recession, especially with the increased demands of COVID-19.
While layoff decisions might seem beyond your control, there are some things you can do to improve your chances of keeping your job. Act like a survivor—be confident and cheerful, and focus on customers. Demonstrate your versatility and offer new skills or capabilities that you can bring to the table.
