Wall Street is poaching bankers in a red-hot job market

Big banks had been adding staff over the past year in strategic expansions, but now sudden jumps in activity have them seeking to hire even more and slowing layoffs they might have otherwise executed.

The overall jobs market in the U.S. has slowed and the economy looks weaker, but bankers are showing confidence in the future. They are seeing enough appetite in corporate boardrooms and executive suites, as well as a booming stock market, that they are pushing ahead with plans to expand and battling for top hires.

Morgan Stanley in recent months hired senior bankers in their teams that work with healthcare, technology and industrial companies. Citigroup and Wells Fargo have been ramping up as part of a broad strategy to take more market share. JPMorgan Chase has hired more than 100 managing directors for its global banking division over the past year, a record for the group.

Even a typical fall season of layoffs has been pushed off, and some banks so far haven’t executed cuts that are supposed to weed out lower performers, according to people familiar with the matter.

Bankers say this summer’s big increase in mergers and acquisitions, coupled with momentum in equity-capital markets, has them confident that deal activity is likely to rise further in the coming months.

Globally, M&A and equity-capital-markets deal volumes both surged 40% in the summer from a year ago and are having their best year since the record-setting 2021, according to Dealogic. Debt-capital-markets activity and lending to companies have also picked up.

That is a big change from recent years, when low deal volume led banks to pare back the staff they had raced to hire in the 2021 boom. And it is a shift from the early spring when the Trump administration’s tariffs plan sent markets reeling and triggered company boards to put deals on ice.

Goldman Sachs had already decided to make a round of cuts in the spring, and the tariffs announcement had executives in wait-and-see mode as to whether another round of layoffs would be needed. Instead, Goldman decided to hire more bankers, with a focus on those who specialize in middle markets, according to people familiar with the matter.

“The arrow is pointing upwards—they’re thinking of increased head count and taking advantage of the boom that is coming," said Alan Johnson of compensation consulting firm Johnson Associates.

The hiring is focused on senior bankers who bring with them connections to make deals happen, he said. The big five investment banks are poaching high-profile bankers from each other and increasingly competing against private-equity firms, too.

Demand is especially high for senior executives who focus on sectors including power, industrials, consumer and financial institutions, said Leslie Gordon, head of the global banking and markets sector at consulting firm Korn Ferry.

“You just don’t see layoffs the way we used to see feast and famine," said Gordon. “Wall Street has learned layoffs can be very disruptive and if deal activity picks up, then you can be caught flat-footed."

Meanwhile, the IPO market this month is the busiest it has been in years. Morgan Stanley is looking to add more equity-capital-markets bankers, according to people familiar with the matter. Citigroup hired a senior executive from JPMorgan to co-lead its equity-capital-markets business and a new head of technology financing in July.

The Federal Reserve’s move to lower interest rates is likely to add to dealmaking by making it more appealing for clients to issue debt or borrow to buy a company.

A big question now is whether the boom is here to stay. Executives have long been talking about seeing “green shoots," only for activity to slow down because of macroeconomic factors, like geopolitics and tariffs.

At an industry conference this month, executives expressed confidence. Morgan Stanley Co-President Dan Simkowitz said volumes are “dramatically improved…versus any period we’ve seen since the post-Covid inflation move."

Even if it does pick up, the long-term outlook for employment on Wall Street remains murky.

While Wall Street needs more humans as bankers today, that could change in the future. Big banks are investing in artificial intelligence with the goal of increasing productivity and cutting costs, raising the question of how many junior and midlevel bankers will be needed to make deals happen.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Lauren Thomas at lauren.thomas@wsj.com