Is Wall Street on Crack With Its Wave of Hiring?
Despite widespread fears of a “double dip” recession, Wall Street is hiring again in droves, a sign that the financial industry anticipates a strong economic recovery. According to The New York Times, New York securities firms have added 2,000 new jobs since February, underscoring the tremendous recovery of the financial sector since the crash in 2008 and the subsequent bailout of faltering banks. Rae Rosen, a regional economist at the Federal Reserve Bank of New York told The Times, “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 this hiring comes at the same time as many indications that the recovery may be faltering. “Double dip” has become the word du jour, with everyone from economists to investors speculating about whether the economy might lose steam and dip back into a recession. The job market outside of Wall Street is still weak, having shed 125,000 non-farm jobs in June.Housing data, while temporarily boosted in the spring by government tax credits, has slowed again. The threat of a double dip last week sent investors rushing to money markets, and a recent poll indicated that many think a double dip is imminent.
Liberal economists like Paul Krugman and Nouriel Roubini have also been very vocal in their prophesies of economic woes. Nobel laureate and Big Think expert Krugman says that the recent warming of the economy does not herald a full recovery, noting that both previous depressions in American history included periods of growth. “We are now, I fear, in the early stages of a third depression,” he wrote in his Times column, calling for a second government stimulus package. NYU professor Nouriel Roubini—known as Dr. Doom for having predicted the 2008 crisis—doesn’t expect another dip immediately, but he worries about another bubble. Unless robust financial reforms are made, he predicts there is a “high likelihood” that we will face another crash in 2 or 3 years.
A financial regulatory reform bill is currently on the floor of the Senate, having already passed the House, and it is been touted as the most sweeping financial reform since the Great Depression. But Wall Street opposes this reform, having lobbied hard against many of the provisions included in the bill. Yet some stringent reforms remain, like regulations on derivatives trading. Final passage of the bill has been delayed by the death of Senator Byrd of West Virginia, but Democrats expect it will be signed into law within weeks.
So why is Wall Street so bullish?