Bump or Bust for MBA Jobs?

Job cuts and a looming recession threaten the hiring outlook, but the big banks and other employers don't plan to slow their recruitingby Alison Damast

It's turning into a nervous 2008 for soon-to-be MBAs. Many of the large financial institutions that business school students typically turn to for summer internships and job offers have posted large mortgage-related losses and announced layoffs in the past few weeks. Just last week, for instance, Bank of America (BAC) announced it would cut an additional 650 corporate and investment banking jobs, while Citigroup (C) said it planned to cut 4,200 jobs globally. Suddenly, the employment outlook is looking a bit more turbulent.

Up to now, the academic year has been good for MBA student job-seekers. Recruiters haven't stopped coming to campus to interview for summer internship jobs, career services officers said. Meanwhile, second-year students looking for full-time jobs appear to be doing as well as, if not better than, their counterparts last year, with many schools reporting increased recruiting, more job offers, and higher salaries for this year's grads. But that can all change in a hurry.

The challenging financial environment means students must be extra diligent when conducting their internship and job searches this year, said Tom Kozicki, board president of the MBA Career Services Council, the umbrella group of school career placement offices. "Those who are attacking the market aggressively, I think, will fare well whether the economy dips or not, but those who wait on the sidelines and hope for something to be delivered to them by their business school are the ones who will get caught if this market turns down," said Kozicki, who also serves as executive director of the career center at the University of California, Irvine's Paul Merage School of Business.

Changing Their Strategies

Brian Mirochnik, 26, a first-year student at the University of Rochester's Simon Graduate School of Business is heeding that advice as he conducts his search for a summer internship. He wants to pursue a career in investment banking, specializing in leveraged finance, but realizes this year he might not be able to obtain a position in that sector, which has been beleaguered by job cuts and financial losses.

He has traveled to New York several times over the past few weeks to talk with nearly 50 investment bankers about the state of the industry. The news hasn't been heartening—they have told him there are about 40% fewer jobs in his area of interest. He has since changed his strategy and is now considering taking an internship in the corporate finance division of investment banking.

"I would be lying to tell you I wasn't nervous about the prospects, because I left a good career to come back to business school to go into investment banking," said Mirochnik, who worked as a commercial banker and entrepreneur before attending Rochester. "I think across the board people are nervous, but you can't let that affect how you go about the recruiting process."

Big Banks Still Recruiting

This year's first-year MBA students have been anxious about the job market from the moment they arrived on campus, said Kenneth Keeley, executive director of the career opportunities center at Carnegie Mellon's Tepper School of Business.

But their fears have been somewhat assuaged by the large number of recruiters who have been on campus to interview students in the past few weeks, including Deutsche Bank (DB), Merrill Lynch (MER), Goldman Sachs (GS), and Bank of America, he said.

"The early numbers again seem to be good. I think many firms will still want to have that pipeline for internships," Keeley said. "The real indicator of how the economy will impact the MBA job market will come next fall, when these firms decide how many offers to give to their summer interns."

So far, many of the big recruiters haven't shown signs of pulling back. For instance, the hiring strategy has not changed at Merrill Lynch—despite a huge $9.8 billion loss in the fourth quarter of 2007, the largest quarterly loss in its history. Merrill plans to hire between 170 and 180 people for summer internships globally, said Sarah Quarterman, the firm's global head of campus recruiting. Last year, Merrill hired 190 associates, but that number was higher than average, said Quarterman.

Taking the Long View of Hiring

The company takes a long-term approach to recruiting, looking ahead several years rather than tailoring their hiring to market conditions, she said. "I think some firms in the past have pulled out of recruiting due to market volatility and then reaped the consequences of that in two to three years' time," Quarterman said. "I think we're all a lot wiser now and realize that the people we hire this year are going to be the VPs of three or four years' time, so if we don't hire them now, we'll have a talent shortage."

Bank of America—which announced on Jan. 22 that its fourth-quarter profit had fallen 95%—is still an active participant in MBA campus recruiting, said Rick Parson, Bank of America's executive vice-president and global staffing executive. "While we have announced some workforce reductions in certain business units in this tough market environment, we still need to look for a variety of skills and diverse experience when hiring," Parsons said in an e-mail.

Second-year business school students appear to be in the safest spot for the moment. According to an Employment Trends Survey Report conducted this fall by the MBA Career Services Council, most of the 85 business schools surveyed reported a 20% increase in overall recruiting activity this fall over last year and a 14.9% increase in on-campus recruiting. The average full-time base salary for the class of 2007 increased by 5.5%, with an 8.8% increase in the signing bonus, the survey showed.

Signing Bonuses Up

The data from that survey seem to be aligning with preliminary hiring figures at schools such as Carnegie Mellon, where nearly 78% of second-year MBA students already had job offers by Jan. 21, up about 10% from this time last year, according to Keeley. "The number of companies making offers is up, and that's a good sign to us," he said. "If that number was dipping, we'd be really concerned."

The employment picture also remains a question mark for undergraduates, according to the National Association of Colleges and Employers (NACE). As of last fall, employers said they planned to hire 16% more graduates in academic year 2007-2008 compared to the previous year, according to a survey released in November. Signing bonuses for undergrads are also up.

But that picture could change in the coming months, said Andrea Koncz, NACE's employment information manager. "We are hearing a lot, of course, about the economy and how it will affect the college job market," Koncz said this week. "We normally do another update survey in late March, but we're probably going to go out sometime in mid-February, just to see if anything is changing at all."

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