New York, NY – According to Challenger, Gray & Christmas, Inc. planned job cuts by U.S.-based financial services companies surged 49% in August as a result of layoffs in mortgage lending units due to weakening demand for mortgage loans as interest rates move higher.
Ugly August CGC Report
Last week in Challenger, Gray & Christmas’s monthly Layoff and Hiring report, the global outplacement consultancy announced that layoffs for U.S. based financial services firms during the month of August totaled 3,096 – 49% higher than the 2,084 layoffs announced in the prior month. Additionally, the August layoff figure was over 470% higher than the level reported in the same month in the prior year.
August marked the third straight month that the number of layoffs at U.S. based financial services institutions totaled more than 1,000 – a clear sign that the employment conditions are deteriorating at U.S. based financial services companies.
One piece of data which contradicts this bearish outlook is the announced hiring plans in the industry. The August report shows that U.S. based financial services firms plan to hire 1,000 new employees – a total that is both better than the 400 total seen in the prior month, as well as the figure seen during the same month of the previous year.
Financial services layoffs on a year-to-date basis are currently running well above last year’s pace. Through the first 8 months of 2013, employers have announced 41,942 job cuts, 56% higher than the 26,887 cuts announced between January and August 2012.
Hiring plans for the January through August period also reveal a weak financial services employment market. For this period in 2013, hiring plans are 60% lower than they were for the first eight months of 2012.
This weakness is corroborated by the fact that the number of net jobs at financial services companies continues to decline. Over the first eight months of this year, the number of net positions at U.S based financial services institutions has actually fallen 38,306 as the number of announced layoffs has outstripped hiring plans.
Depressing Citi Announcement
The depressing data released by Challenger, Gray & Christmas was supported by an announcement made by Citigroup last week who said they plan to slash 1,000 jobs in Nevada and Texas due to waning demand for home loans and mortgage refinancing as interest rates move higher.
Citi explained that 760 of the jobs being eliminated are in Las Vegas, while another 100 are in Irving Texas. The remaining layoffs involve employees who work from home. Most of these layoffs are expected to be effective in the 4th Qtr 2013 or the 1st Qtr 2014.
The Citi announcement comes on the heels of a slew of announcements by Wells Fargo in August and September where they said they plan to axe 5,200 employees, many of whom work in their Wells Fargo Home Mortgage division. This follows similar job cut announcements from JP Morgan and Bank of America in August.
The downbeat report from Challenger, Gray & Christmas last week, combined with the recent announcements from both Citibank and Wells Fargo suggest that employment conditions in the financial services industry remain extremely weak.
While the recent drop-off in mortgage activity has been unexpected, the big question is when this downturn in mortgage volume will abate. Until then, most senior management at financial services companies remain cautious and few are willing to forecast a rebound in employment outlook for their industry over the foreseeable future.