Wall Street jobs axe threatens 70,000

The financial industry is bracing for a fresh round of job cuts as Wall Street banks slash costs to cushion the blow of further market turbulence and deepening economic woes in 2009.

Executives and analysts say the redundancies – to be finalised this month as banks prepare next year’s budgets – could top 70,000 among US groups alone and add to the estimated 150,000 jobs already lost by the financial sector worldwide.

The job losses are expected to be concentrated in the investment banking and trading businesses that have been hit hard by the near-freeze in capital markets and the collapse in takeover and financing activity.

The continued shrinking of the banking industry will deepen the economic plight of financial centres such as New York, London and Hong Kong by reducing tax revenues and putting pressure on the local housing market.

“The fourth quarter is going to be very disruptive,” Meredith Whitney, analyst at Oppenheimer, said in a video interview with the Financial Times. “For many of the capital markets intensive players, you’re going to have resizing of anywhere from 25 to 30 per cent of their workforce. But if you think about it, from the peak, revenues are down more than that.”

Goldman Sachs, which has fared better than many rivals during the downturn, last week began a planned 10 per cent reduction in its 32,500-strong global workforce. That cut is part of the expected fourth-quarter cull.

Most other US banks have already announced cuts.

Citigroup is in the midst of scrapping 23,000 jobs, Merrill Lynch has lost an estimated 5,700 – nearly 9 per cent of staff – while Morgan Stanley has made 4,400 workers redundant, according to Bloomberg data.

These redundancies came on top of the estimated 23,000 jobs lost after the collapses of Bear Stearns and Lehman Brothers.

But bankers say more is to come as the industry’s revenues continue to fall in the fourth quarter and show little sign of improving in 2009.

A senior executive predicted that, based on his company’s own estimates, the next round of redundancies among US-based firms could reach 70,000.

A recent study by the Federal Reserve concluded that New York city alone could lose between 55,000 and 78,000 financial jobs over the next few years.

Most banks declined to comment on their redundancy plans, saying they had yet to be finalised.

Analysts said the more likely candidates for further cuts included Merrill Lynch, which is about to be bought by Bank of America, Citigroup, and securities groups such as Morgan Stanley and Goldman Sachs, which are reliant on capital markets activity.

By Francesco Guerrera and Aline van Duyn in New York
Published: November 9 2008 23:32 | Last updated: November 9 2008 23:32

Source: The Financial Times

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