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Office workers walk past the entrance to Wall Street Station in New York’s financial district.© Jon Hicks

Here are two words you won't hear a Wall Street executive utter any time soon: "hiring" and "spree."

Earlier today, JPMorgan Chase & Co. announced that it will reduce headcount in its consumer banking arm by 3,000 to 4,000 people this year.

Morgan Stanley and Citigroup Inc. have also unveiled plans in recent months to shed staff. As early as this week, Goldman Sachs Group Inc. will begin its annual exercise to cull 5 per cent of its employees, with deeper cuts possible in equity trading, Reuters reported.

The slow grind of job cuts highlight the new reality on Wall Street, which is chafing under fresh regulatory constraints, reduced leverage and lower trading volumes.

To boost profits, banks are doling out a lower percentage of their revenues as compensation. In some cases, they're also deferring a good chunk of employee bonuses over several years.

"The days of light-touch regulation and aggressive growth are not coming back any time soon," said Ilana Weinstein, founder of The IDW Group, a prominent financial-services recruitment firm.

Instead, banks have to look elsewhere to improve their profitability. "Cutting costs and cutting headcount and cutting compensation – those are your levers," she said.

For those employees who remain, it's not all bad news. Thomas DiNapoli, the comptroller of New York State, released an annual report on Tuesday on Wall Street compensation showing that the average bonus for 2012 increased 9 per cent to $121,900 (U.S.).

But he also noted that the industry employed 1,000 fewer people at the end of 2012 than it did a year earlier, adding that he believes "the industry will continue to restructure and downsize until a new business paradigm is established."

If that doesn't sound like a lot of fun, that's probably an accurate assessment. Some traders have already decamped for hedge funds, where they don't have to contend with the same regulatory constraints or reduced appetite for risk.

"Wouldn't you want to be at a place where none of this is happening?" asked Ms. Weinstein. "Of course you would."

(Joanna Slater is the Globe and Mail's New York Bureau Chief)

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