Charles Schwab hiring is down - but the last time this happened, shares took off

5 days ago by Jon Marino in Facts, Trends

If you talked to Chuck heading into earnings Monday, it might be tough to get a read on the San Francisco-based brokerage and how its prospects are going to pan out. Charles Schwab ($NYSE:SCHW) is seeing analyst expectations heading into its earnings report July 16 of $0.66 per share, according to analysts tracked by Zacks Investment Research. 

Charles Schwab was on pace to chase or even top near-term highs for job postings for the first month of the first quarter - as our first chart shows, the company then saw the total number of job postings online take a big dive. In the last 12 months, jobs posted from Schwab hit a high of 735 last summer, plummeting very recently to 395 - a 46% decline. The reduction in open posts comes after a 2018 where, according to the company's annual report, it staffed up 11%. 

At the same time, the company's share price has lost more than 20% of its value over the last 12 months and has lagged broader indices as of late. 

And Schwab has been under pressure from virtually all angles; our next chart focuses specifically on Goldman Sachs' ($NYSE:GS) hiring prior to and throughout the second quarter of the year. From late February to early July, the bank more than doubled staff working in Consumer and Investment Management businesses. Digitization of savings and retail investing - specifically, its migration to the smartphone - has leveled the playing field for online upstarts looking to take on brick-and-mortar brokerages and banks. 

Goldman is far from the only challenger to try and race Schwab to the bottom - either reducing fees or lifting interest for consumer accounts in an attempt to reel in an increasingly digitized clientele that no longer depends on brick-and-mortar services any longer. JPMorgan Chase ($NYSE:JPM) is offering up free trades to clients (they're far from the only one to cut or eliminate fees to try to keep business) and legacy players are launching digital ads and apps to combat startups ranging from savings - Stash ($STASHINVEST) - to investing - Robin Hood ($ROBINHOOD) and Betterment ($BETTERMENT) - aiming to disrupt consumer banking. 

The chart above tracks the pace of hiring at Robin Hood, Silicon Valley investing and savings platform that recently earned a $7 billion valuation in its latest funding round. Since the beginning of 2019, open jobs at Robin Hood have precisely doubled, from 41 at the start of the year to 82 on July 7. But Schwab has been winning races to the bottom for more than 40 years, as a recent Wall Street Journal report pointed out, and the alternative data supports it. 

The last time Schwab made a big cut to open positions, when its stock had hovered for a few months in the $40-$45 range, it preceded a 6-month breakout in stock price that was matched with a 12-month increase in headcount. So maybe investors shouldn't sweat the recent decline in job postings, so much as get excited about it.

Probably the best way to know for sure, is to talk to Chuck. 

About the Data: 

Thinknum tracks companies using information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales. 

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Jon Marino

Jon Marino is Thinknum's finance editor, covering the impacts of alternative data on public companies and investors. Prior to joining Thinknum, Jon worked in the ...

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