NEW YORK — The U.S. financial industry has been shedding jobs at a record clip, and some analysts predict the pace will only accelerate over the next year-and-a-half as banks cut costs in the face of the housing market slump and the weak economy.
Analysts at the financial research firm Celent LLC said in a report Tuesday that it expects the U.S. commercial banking industry — essentially, all companies that lend or collect deposits — to lose 200,000 of its 2 million jobs over the next 12 to 18 months.
An annual loss of 200,000 jobs at the nation's commercial banks would be an unprecedented number.
In 2007, the entire financial services sector — which consists of mostly commercial banks — announced job cuts that totaled a record 153,000, according to the job placement consultancy Challenger, Gray & Christmas, Inc. More than half of those cuts were in the mortgage-lending business, and occurred all over the country, particularly in New York and California.
Octavio Marenzi, the head of Celent's financial consultancy unit, said more layoffs are inevitable as the subprime crisis hits other parts of the banking industry and spreads beyond mortgages to mortgage-related products, such as home-equity loans, and other types of lending, such as credit cards.
"The banking industry over the past 40 years has never seen a downturn in its revenue growth," Marenzi said. "In 2008, it looks like it will decrease for the first time in living memory. They're going to have to respond with severe cost cutting. It's not an environment they're entirely used to."
The credit crisis began in earnest last summer when the markets tightened up at the sight of spiking subprime mortgage defaults.
"There's no horizon yet that anybody can see," said John Challenger, who runs Challenger, Gray & Christmas. "New events keep rolling out ... suggesting that there's more to come."
Financial services companies announced in January that they were cutting 16,000 U.S. jobs, and companies said in February they were trimming 6,000 more, Challenger said. Those figures are below last year's peak in August when companies announced they were cutting nearly 36,000 jobs, but analysts expect further bloodletting in the coming months.
Many banks that have reported huge losses have so far not announced significant layoffs outside the mortgage area, Challenger added. Just Tuesday, Swiss bank UBS AG — which has a big portion of its staff in the United States — said it lost more than $12 billion in the first quarter.
And Celent's estimate does not include the securities industry, which currently employs some 800,000 people — more than it ever has, after a multiyear hiring spree, Marenzi said.
The investment bank Bear Stearns Cos. has 14,000 staffers, and JPMorgan Chase & Co., the company buying the investment bank, has not yet announced how much of that staff it intends to keep. Meanwhile, Citigroup Inc. officially announced in January it was cutting 4,200 jobs globally, mostly in its investment banking business, but said there are more layoffs to come.
"What we haven't seen are big mega-layoffs — tens of thousands of people in a large company," Challenger said. "It just feels to me there are big ones coming."
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.