Financial Sector Job Cuts Surge Last Month


Despite the modest improvement in the jobs outlook seen across much the economy recently, Wall Street continued to slash jobs last month as weakness in mortgage applications, weakness in trading, and general rightsizing was seen at many of the nation’s largest banks.

Challenger, Gray & Christmas February Report

According to Challenger, Gray & Christmas’ monthly Job Cuts Report released last week, the financial services industry announced the most planned layoffs of any industry in the US economy during February with plans to cut 9,791 jobs in the coming months.  This is almost double the 4,817 planned job cuts announced in January, and is the largest number of monthly layoffs announced since the 21,724 total seen in February 2013.

Over the first two months of 2014, Wall Street firms have announced 14,608 planned layoffs.  While this is significantly higher than the total seen in recent months, it still represents a 52% drop from the 30,302 planned job cuts announced in the first two months of 2013.

John Challenger, CEO of Challenger, Gray & Christmas explained this weakness, “While some of the cuts in the financial sector were related to cutbacks in mortgage lending operations, a large portion of the banking workforce reductions in February were due to the ongoing shift away from branch banking toward increased mobile banking.  This is a trend that is gaining momentum and undoubtedly will have a profound impact on banking employment levels in the coming years. The number of bank tellers and traditional banks will continue to shrink as more people manage their bank accounts over their phones, on their laptops, and at ATMs and kiosks.”

Planned hiring at financial services firms did rise slightly in February to 400 jobs from a meager 129 new jobs seen in January, however this is considerably weaker than the 1,130 new jobs announced in February 2013.

JP Morgan Cutting ???? Jobs

One of the Wall Street firms that announced the biggest spate of layoffs in February was JP Morgan Chase & Co which reported 3,500 expected job cuts.  In recent months, JP Morgan has announced it will slash over 10,000 jobs in its business globally, primarily because its mortgage business (like so many other banks) has slowed to a trickle.

Interestingly, the Financial Times has written that it expects that JP Morgan may reduce headcount by as many as 15,000 jobs, and the number of layoffs could reach close to 20,000 if the firm’s mortgage business continues to worsen.

Mortgages Not Only Reasons For Layoffs

However, weakness in the mortgage business is not the only factor prompting higher job cuts at JP Morgan and other Wall Street banks.   Clearly weak trading revenues in the first quarter continue to prompt layoffs at many banks.  For example, JP Morgan Chief Executive Officer Jamie Dimon recently said that revenue from the firm’s equities and fixed income businesses was down about 15%, consistent with the decline expected from Citigroup’s finance chief.  This could presage the fourth straight drop in trading revenue during the 1st quarter.

Additionally, the increased adoption of technology and changing customer behavior is also having a substantial impact on most banks’ employment plans – particularly in the bank branch network.

Speaking about JP Morgan’s layoff plans, Challenger said, “According to reports, most of these will come from its branch network. However, these are not cuts from a weakening economy or a struggling bank. These are proactive moves by CEO Jamie Dimon in recognition of the coming sea change in the way people bank. The bank has shifted from a ‘branch-building strategy to an optimization strategy.’ In other words, Chase will have more places to bank, but technology will replace tellers for day-to-day banking. Meanwhile, the bank promises to provide more personalized asset-management services for those seeking more financial planning guidance.”

Other large banks, including Wells Fargo and Bank of America already responded to the declining relevance of the bank branch, as they have both been closing branches for the past few years.

Relevance for Research Industry

While most of these trends won’t have a direct impact on the research business, the continued weakness in equity and fixed income trading won’t help business prospects or hiring.  Clearly, sell-side and independent research firm revenue will be impacted by weak commission flows.  In addition, many large banks with both struggling mortgage units and over-sized bank branch networks may try to keep a lid on hiring across their firms – including in their investment research businesses.



About Author

Leave A Reply