Posted by: Geoff Gloeckler on November 11, 2009
The rapidly diminishing numbers of top MBA students getting financial services jobs might seem like just another grim reminder of the devastation the financial crisis has wrought on the B-school job market.
However, according to an only half-joking report released last week, the low numbers of Harvard MBAs landing Wall Street jobs could point to something else – an impending recovery.
The “Harvard MBA Indicator” is a market predictor designed by HBS alum Ray Soifer. According to his somewhat facetious theory, the percentage of Harvard MBAs each year who take market-sensitive jobs, generally those closely tied to investing, is inversely related to the health of the stock market. In other words, the fewer HBS grads that take jobs in banking, venture capital, leveraged buyouts, etc., the better the Dow will do.
Despite what Soifer calls “obvious drawbacks” of the indicator, which lags the market and is imprecise, he says it’s “nonetheless generally accurate.” Here’s how it works: If more than 30% of HBS graduates take market sensitive jobs, it means the market is inflated, and it's a long-term sell signal. Fewer than 10% taking those jobs is a long-term buy signal.
Looking back, Soifer says the indicator has delivered a few solid buy signals and successfully predicted the 1990, 2001, and yes, 2008 recessions. What can it tell us about the market today? For the first time since 2004, the percentage of Harvard students taking jobs in investment banking, investment management, hedge funds, sales and trading, venture capital, private equity or leveraged buy-outs is under 30% -- tallying just 28% of the 2009 class, down from a record 41% last year, Soifer says. This signals, according to his report, a shift from “sell” to “neutral.” Perhaps good news for the economy, but probably small comfort to MBAs looking for finance jobs.