Layoffs Hit an All-Time High in Financial Services Sector

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By Jason Simpkins
Associate Editor

Merrill Lynch & Co. Inc. (MER) Chairman and CEO Stan O'Neal isn't the only worker in the U.S. financial-services sector with a job-security issue. Indeed, once his ouster becomes official, O'Neal will become just one more of the 130,000 casualties that have already made 2007 the worst year ever for layoffs in the U.S. banking-and-brokerage marketplace.

According to outplacement firm Challenger, Gray, and Christmas, those 130,000 job cuts are nearly three times the 50,000 cuts reported for all of 2006, and has already smashed the all-time record of 116,000 layoffs set in 2001.

"It's the worst year on record for job cuts in the financial services sector," John Pedderson, a Challenger, Gray, and Christmas spokesman told BusinessWeek.

According to Pedderson, about 80% of the job cuts were announced in the past two months, as finance firms suffered epic losses from subprime mortgage problems, a historic housing slump, and a debilitating credit crunch that turned into a global crisis this past summer.

In August, Accredited Home Lenders Holding announced it would cut 1,600 jobs. That same month, Capital One Financial Corp. (COF) said it would close its Greenpoint mortgage unit, effectively dispatching 1,900 jobs. In September, Countrywide Financial Corp. (CFC) eliminated approximately 12,000 positions – more than 21% of its work force totals from the previous year. Also in September, IndyMac Bancorp (IMB) said it would terminate about 1,000 employees.

Mortgage lenders have been the hardest hit in terms of job losses, but financiers, traders, and investment bankers have seen their share of layoffs as well. Morgan Stanley (MS) and the Bear Stearns Companies Inc. (BSC) are cutting 300 and 310 jobs, respectively. Credit Suisse Group (CS) is purging 170 positions, HSBC Holdings PLC (HBC) 750, and UBS AG (UBS) is eliminating 1,500 jobs.

Overall payroll growth has slowed sharply in the past year. Private payrolls were growing about 140,000 a month at the end of 2006, but that growth slowed to just 90,000 a month over the past three months. Economists expect only modest job growth in October, with a median forecast of 80,000 new non-farm payroll jobs for the U.S. economy, MarketWatch reported.

Economists have forecast modest job growth in October, and the unemployment rate is expected to remain at 4.7%. Monthly figures for initial jobless claims, the unemployment rate, and non-farm payroll additions are set for release later this week.

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