"Wall Street Pulls Itself Together And Looks Ahead"

STEVE INSKEEP, host:

All this week in our series New Jobs For A New Decade, we've been looking at various parts of the economy and finding out where new jobs are likely to be created. And we're going to look this morning at Wall Street. Now, it used to be said that Wall Street profits, whether the market goes up or goes down, doesnt matter as long as the market moves, but not when it goes down as much as it did in the last couple of years. Banks, investment firms and insurance companies have lost about 700,000 jobs. Still, the financial sector has a history of booms and busts and jobs seem certain to come back.

NPRs Jim Zarroli reports on where those jobs are likely to come from.

JIM ZARROLI: Damian Handzy says its a question he hears a lot.

Mr. DAMIAN HANDZY (CEO, Investor Analytics): I do this for my family all the time, right? Dad, what do you do? And, you know, cousin, what do you do?

ZARROLI: What he does is something called risk management.

Mr. HANDZY: I help people understand what types of risks their investments are exposed to, and more importantly, how to mitigate those risks.

ZARROLI: Handzy runs a firm called Investor Analytics. Its hired by institutional investors like hedge funds who want to know how risky their investments are - what will happen to their portfolios if, say, the dollar falls or interest rates rise. The firm does this with the aid of highly complex computer models, some developed here in its Manhattan office.

Handzy is a nuclear physicist. He was part of a wave of scientists and mathematicians who came to Wall Street during the derivatives boom. He says business at his firm slowed down when the market crashed, but lately his small company has had to hire six new people.

Mr. HANDZY: It was sometime during the summer months of 2009 that we began seeing some signs of a thaw in the financial markets. And at that time people began seriously looking at risk management.

ZARROLI: As Wall Street recovers from the crash, many firms want to make sure they don't get saddled with the kind of toxic assets that helped cause the crisis in the first place, so they're trying to come up with better risk management models. It's one of the few areas in finance where jobs are growing right now.

The financial sector lost nearly 10 percent of its jobs over the past three years. Many will never come back, especially in areas like mortgage finance.

Richard Lipstein of Boyden Global Executive Search is a Wall Street recruiter.

Mr. RICHARD LIPSTEIN (Boyden Global Executive Search): If you sold the product that became toxic, that developed a bad reputation, you're going to have a great deal of difficulty getting another job, because, number one, that product is no longer of interest, and number two, you have a somewhat tainted reputation.

ZARROLI: Things won't necessarily be any better if you worked in one of the less controversial corners of the industry. Benjamin Poor of Cerulli Associates says on the one hand more firms are making money these days.

Mr. BENJAMIN POOR (Cerulli Associates): But I think, you know, once bitten twice shy, and they'll be sure to approach new hires with care.

ZARROLI: Poor says a lot of firms over-hired during the boom and don't want to make the same mistake again. But Poor also says hiring is taking place along the fringes. Some firms, like the bond giant PIMCO, are expanding, and they can choose from a huge pool of candidates.

Mr. POOR: We talk to, on a regular basis, people in the industry, some of whom have 20 years' experience, and they're not just, you know, average Joes, but they're really talented individuals who've been out of work for, you know, six to 12 months. And when that type of talent is available, you've got to be able to take advantage of that talent and go out and bring it into your firm.

ZARROLI: Poor says on Wall Street good talent is critical, and this skills glut is a huge opportunity, especially for small, privately held companies that can hire people without worrying about jittery shareholders. Because if the past is any guide, Wall Street will come back.

Finance Professor Roy Smith of NYU's Stern's School of Business says every downturn in the market has been followed by a period of innovation. Somebody came along and invented something that led to another boom, like securitization or derivatives.

Professor ROY SMITH (New York University): Wall Street lives in an environment of bull markets and bear markets, expansion and contraction for at least the last 50 years or so. Every time there's been a slowdown, the businesses have expanded in its wake, and indeed have way exceeded what the businesses were at before.

ZARROLI: Where will the next boom come from? Smith says one possibility is green technology. If there really is a boom in alternative energy, Wall Street will need people who can bring green companies to market or analyze their profit potential. That's just a guess, however. By their very nature, booms are hard to foresee, but when they come they almost always end up making some people very rich and creating jobs in the process.

Jim Zarroli, NPR News, New York.