Could Meredith Whitney’s Prediction of Another 50,000 Financial Job Cuts Come to Fruition?
Famed banking analyst Meredith Whitney predicted that the financial services industry, which has been battered by layoffs in 2012, may lose another 50,000 jobs because of shrinking business. Now, it appears many experts agree with her.
About 2.1 million people work in the financial services sector. As of last year, it employed about 167,000 workers in New York. Exactly how many people work in areas connected to capital markets is tough to say, though that number has been on the decline. According to Challenger, Gray and Christmas, there have been 20,196 job cuts announced in the industry through June. The cuts are continuing. Deutsche Bank, for one, recently announced layoffs of 1,900, most of which will be in investment banking.
Eurozone Crisis Continues to Take Its Toll
“The financial sector has been hit fairly hard over the past year,” said John Challenger, the head of Challenger, Gray and Christmas, a Chicago-based provider of executive outplacement services, in an interview, adding that it was among the most affected by layoffs. “The situation in Europe is far from resolved. It continues to take its toll on the financial sector.”
Indeed, Whitney’s remarks underscore a long-standing weakness in the industry.
Many critics have accused banks of over-hiring in the boom years and over-firing during the busts. The U.S. banking industry shed nearly 200,000 jobs in the three years ended March 31, 2010, and during the subsequent six quarters ended September 30, 2011 added 82,000 positions.
50,000 Workforce Reduction Not Out of the Question
“The industry has begun to cut again in the past three quarters,” Erik Oja, an analyst with S&P Capital IQ, tells eFinancialCareers. “A 50,000 workforce reduction is not out of the question.”
Citigroup has been by far the leading job cutter in the industry, slashing its headcount from about 374,000 in 2007 to 261,000, according to Oja. Goldman Sachs slashed 8.5 percent of its workforce, or about 3,500 people, in the past year and is continuing to cut this year. Morgan Stanley recently said it plans to cut another 1,000 workers this year.
Bank of America Number One Candidate to Announce Layoffs
Bank of America, which in May announced plans to lay off 2,000 senior bankers as part of a planned reduction of 30,000, may shed even more employees this year from its staff of about 275,000, according to Oja. Citigroup and Wells Fargo may announce more layoffs by the end of the year beyond their previous announcements, he said.
“I would say that Bank of America would be the number one candidate [to announce new layoffs] simply because they are so large and because revenue growth has been negative in the past two quarters,” he said.
Finding new jobs for many will not be easy. In fact, Whitney bluntly advised job seekers on Bloomberg TV to “take what you can get.”
Compliance, Risk and Operations Selectively Hiring
Recruiters such as John Landers, a regional vice president at Robert Half International, say that the job picture in the industry is not entirely bleak. Indeed, demand for some job categories, such as compliance and risk, continues to be strong. “We are starting to see some operations positions come back,” he said. “Phones are ringing … It is starting to feel much better.”