Wall Street Bracing for More Pink Slips
Citigroup, Merrill Lynch and Wachovia this week announced 12,400 job cuts, and the number of pink slips is likely to rise as losses mount and the economy works its way out of its malaise.
So far this year, 36,000 job cuts have been announced in all U.S. financial services, according to job placement consultancy Challenger, Gray & Christmas, Inc, as of Thursday. That figure does not include Citi's layoff announcement.
Job losses will surge well beyond that given that the latest data does not account for widely expected cuts among the 14,000 employees at Bear Stearns after JPMorgan Chase rescued the broker from bankruptcy.
"It is almost inevitable that we are going to see significant layoffs," said Octavio Marenzi of financial consulting firm Celent.
On Friday, Citigroup posted a $5.11 billion quarterly loss and said it will cut another 9,000 jobs after suffering billions of dollars of writedowns related to mortgages and turmoil in the credit markets. In January, Citi said it planned to cut 4,200 jobs.
On Thursday, Merrill , the world's largest brokerage, announced writedowns totaling $9.7 billion on top of $25 billion taken in the second half of last year.
Merrill said it planned to cut an additional 2,900 jobs. In the first quarter, Merrill slashed about 1,100 positions.
Wachovia , the fourth-largest U.S. bank, said this week it plans to eliminate 500 jobs from its corporate and investment-banking division.
But as the wave of loan losses continues to grow in a slowing U.S. economy and still-tight credit conditions, Wall Street may be in for a rude awakening.
Global financial institutions have so far sustained well over $200 billion of write-downs and credit-related losses, with the ailing U.S. housing market a central catalyst.
Billionaire investor George Soros said global losses are likely to top $1 trillion from the subprime mortgage crisis, which he called the "worst financial crisis of our lifetime."
Already, Marenzi expects at least 100,000 job losses at U.S. commercial banks, or companies that lend or collect deposits. That figure could rise to between 150,000 and 200,000 in the next 12 to 18 months, he said.
"Banks have been reluctant to reduce headcount because they are waiting for a turnaround," Marenzi said. "I don't think we will see a huge uptick, and if anything, conditions are actually deteriorating, not improving," he added.
In 2007, the entire U.S. financial services sector, consisting mostly of commercial banks, announced a record 153,105 job cuts, according to Challenger, Gray & Christmas.
Job losses in London's City financial district are likely to hit 40,000 due to fallout from the U.S. subprime mortgage crisis and global credit crunch, analysts at JPMorgan recently projected. That's double their previous estimates.