The headlines pertaining to the labor market in finance have been dreary fairly recently. Just in the past few days, we have heard that UBS is reducing their investment bank by 50%. Then today, there were reports that Goldman named the 261 Managing Directors this year, down from 321 last year. This is the lowest number since 2008.
Students bombarded by headline after headline of woes in the financial industry seem to have taken these headlines into consideration when thinking about careers. One of our sources mentioned offhand that Ec 10, which used to be the most popular course among Harvard undergraduates, has been surpassed by CS 50, the introductory computer science class. Ec 10’s popularity is not exactly at its apex. Could this be a sign that a turnaround in the financial markets is just around the corner? The Harvard MBA Indicator comes to mind.
In cyclical industries, there seems to be a a sort of lagged synchronization between the underlying market and the labor market. In other words, when an industry is prosperous, then the courses geared towards that industry become popular. However, as those students who took those courses graduate and enter the labor market of that industry, there becomes an oversupply of talent just as the demand for that industry enters a downturn. Then, in the downturn, students pursue other interests, setting up a labor shortage that occurs just as industry demand is recovering.
During the TMT bubble, computer science became the favored discipline du jour. But in the aftermarket of the TMT crash, the popularity of computer science and engineering waned. This has led to the shortage of engineering talent the technology sector is experiencing right now. This shortage has just so happened to coincide with an increased demand for technological talent, just as the release of “The Social Network” shifted the zeitgeist away from finance jobs and back to startups. The current shortage is not just affecting companies that want to be the 500th GroupOn. It’s left us with a lack of engineering depth for the truly innovative applications.
Unfortunately, Silicon Valley might have to wait until those CS 50 students graduate. The experienced engineers seem to be happy where they are.