Banks and Other Finance Firms Book a Total 165 Percent Increase in Job Cuts Between 2010 and 2011
Banks and finance firms reported more than 63,600 job cuts last year—a 165 percent increase over 2010, says a new report from global outplacement firm Challenger, Gray & Christmas. And the finance sector is not likely to bounce back quickly, says the firm.
“In the financial sector, the economic troubles in Europe will continue to be a cloud hanging over Wall Street in 2012," said John A. Challenger, chief executive officer of Challenger, Gray, in a statement announcing the latest figures.
“While temporary fixes have been put in the place for the time being, there is still heavy risk of a collapse, which would ripple quickly through the global banking system. On the home front, many banks are still saddled with millions of foreclosed properties worth a fraction of their original values,” he said.
Of the job cuts for September 2011, nearly 70 percent of the total, came from just two organizations: Bank of America and the United States Army, says Challenger, Gray, noting that job cuts last year were dominated by both government and financial sectors.
“These two alone accounted for 41 percent of all the job cuts announced last year. The 183,064 government job cuts represent a record high for that sector, since we started tracking it in 2002. And, while the financial sector did not come close to its record high, annual cuts for the sector were up 165 percent from 2010,” says the company CEO.
Unfortunately, both the financial and government sectors are likely to continue to struggle in 2012, says Challenger, Gray. Washington is under immense pressure to cut spending, and it looks like every deal to extend tax cuts, raise the debt ceiling and pass the budget will come with measures to cut spending, which can be expected to result in more job cuts, the company CEO said.
There was some positive news on the jobs front this week when payrolls firm ADP announced that businesses overall added a huge 325,000 net jobs in December of last year—their highest level in a year, eclipsing the 180,000 figure forecast by most analysts.
The gain was almost double the average monthly gain since May, when job creation slowed sharply, ADP said.
But some analysts cautioned that the monthly number is often an unreliable indicator of the actual number of jobs created in the month, the AFP reported.
Nomura analysts pointed out that ADP's December number tends to be distorted because unlike the Labor Department count of employment, which measures the number of paid jobs in a certain period, the ADP series measures the number of people listed on firms' payrolls at a given time.
"Companies often keep all employees on the payroll all year—even if they are not being paid—for tax purposes," they said.
BMO Capital Markets Economics analyst Robert Kavcic said the strong ADP report probably should be taken with "a grain of salt."
Fortunately the pace of downsizing in most industries is still well below recession levels, Challenger said in its report.
But even where job cuts remain low, employers appear reluctant to add jobs, and whereas overall job gains picked up at the end of the year, after dipping in the third second and third quarters, the pace of job creation is still too slow to make a significant dent in the number of unemployed, said Challenger, predicting that “job creation is likely to remain slow and steady in 2012.”
“Washington seems paralyzed when it comes to enacting policies that might spur job growth,” he added.
Even if they were to pass some legislation that could help, the impact is rarely immediate and is typically smaller than anticipated.