Sept 27 (Reuters) - Jefferies Financial Group's third-quarter profit slumped 74% as lingering economic uncertainty kept dealmaking in check, but the firm said it was hiring more managing directors to prepare for a "normal" investment banking environment next year.

Market conditions are beginning to improve, Jefferies said on Wednesday, bolstering the view that mergers and acquisitions (M&A) are starting to pick up pace after the Federal Reserve signaled it is nearing the end of its tightening cycle.

Investment banking revenue at Jefferies was $644.6 million, about 2% lower than last year but nearly 28% higher than the prior quarter.

"We are increasingly optimistic that we have come off the bottom of the cycle and that momentum in investment banking will continue," CEO Rich Handler and President Brian Friedman said in a statement, noting that "the green shoots we mentioned last quarter have multiplied".

Jefferies said it expects around 360 managing directors in its investment banking franchise at the beginning of 2024, up from the 299 that it started this year with.

The biggest hit to third-quarter earnings came from the asset management unit, where revenue plummeted 97% from last year, which included results from units Jefferies has since shed.

The bank's results are often viewed as a prelude to earnings at Wall Street titans such as JPMorgan Chase, Goldman Sachs Group and Morgan Stanley.

Revenue in the capital markets unit jumped 14%, to $523.6 million, boosted primarily by strength in the fixed-income business.

Overall, Jefferies reported a profit of $51.4 million, or 22 cents per share, for the three months ended Aug. 31, compared to $195.5 million, or 78 cents per share a year earlier. (Reporting by Niket Nishant in Bengaluru and Lananh Nguyen in New York; Additional reporting by Pritam Biswas; Editing by Pooja Desai)