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Finance Sector Hit by Record Layoffs


October 29, 2007 | From

One of America’s job-producing industries is now slashing thousands of positions.

America is in its worst year ever for layoffs in the financial services industry—and the year isn’t over yet. This is bad news for an economy struggling to cope with a deflating housing bubble.

As of October, finance companies have announced plans to eliminate 130,000 jobs this year, more than double last year’s 50,000. The previous record was set in 2001, when 116,000 jobs were cut following the 2000 stock market crash.

What makes the data particularly disturbing is the fact that 80 percent of the job cuts have been announced since August, when the subprime credit crunch hit Wall Street. This indicates that many financial firms were caught off-guard, so more cuts could be coming in the near future.

“It’s the worst year on record for job cuts in the financial services sector,” confirms James Pedderson, a spokesman for outplacement firm Challenger, Gray & Christmas.

As could be anticipated, lenders are taking the brunt of job losses. Countrywide Financial, the nation’s leading mortgage lender, sent pink slips to 12,000 of its 56,000 employees. IndyMac Bancorp, Accredited Home Lenders Holding, and Capital One have all also announced big cuts.

Layoffs have also spread to big banking and investment houses, with traders, financiers and even senior bankers getting the ax. Bear Stearns is cutting 310 jobs, hsbc 750, Credit Suisse 170, and ubs 1,500. Last week, Bank of America announced 3,000 layoffs, mostly in its investment banking division.

Morgan Stanley is cutting about 200 jobs in the U.S. A few people who lose their positions will be offered the chance to take up new stations in Asia. “[W]e are selectively resizing some of our business to reflect current market conditions, as well as reallocating resources to those regions outside the U.S. where we see the best potential for growth,” Mark Lake, a Morgan Stanley spokesman, said.

Not exactly a vote of confidence for the direction of the U.S. economy.

Overall, experts believe that the firings will eventually envelop 10 percent of the investment banking work force. “We’re talking about the most dramatic adjustment to the investment banking talent pool in five years,” Gary Matus, a partner at executive search firm Egon Zehnder International, said.

Fallout from the downturn in the housing market, as well as the resulting Wall Street credit crunch, is evidently starting to take its toll on the job market. The economy will not go unaffected. From the start of 2003 to March 2006, housing-related industries, including mortgage companies, homebuilders and contractors, contributed 23 percent of all new jobs. That translates to about 1.3 million, according to Moody’s

Now that this industry is shedding tens of thousands of jobs instead of creating new ones, job seekers might be in for some stiff competition. Watch for America’s wobbly economy to feel the effects.

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