83,000 Global Financial Layoffs in 1 Year Worst Yet to Come

[mobes]

May 27 (Bloomberg) -- It's as if the entire workforce at Goldman Sachs Group Inc. and Morgan Stanley vanished in less than a year.

From Tokyo to London to New York, financial companies announced plans to shed more than 83,000 jobs since last July as revenue and compensation pools evaporated, according to figures compiled by Bloomberg. The dismissals range from 90 jobs, or 0.1 percent of the total, at London-based HBOS Plc to about 9,160 jobs, or 66 percent of the workforce, at New York-based Bear Stearns Cos., which is being acquired by JPMorgan Chase & Co.

The cuts add up to 3.3 percent of employees at the 28 firms eliminating positions. That's significantly less than the market slump from 2000 to 2003, when 17 percent of banking and securities jobs in New York were wiped out, data from the Bureau of Labor Statistics show. Given the record-breaking losses of the past year -- banks and brokers have taken $383 billion of writedowns and credit losses -- some economic forecasters and industry veterans expect the number of dismissals to increase.

``My guess is there's probably more to come,'' said Sanford ``Sandy'' Weill, chairman emeritus of Citigroup Inc., who worked on Wall Street for 53 years, in a May 21 interview. ``I think this is tougher'' than the last market decline, Weill, 75, said.

New York-based Citigroup, the biggest U.S. bank by assets, has announced 15,900 job cuts worldwide, about 4 percent of its employees.

New York's Outlook

The retrenchment has affected positions as varied as biotech bankers, compliance officers and Latin America debt traders -- not just mortgage salesman and credit traders -- as revenue declines spread beyond fixed-income. New York and London, the world's biggest financial centers, are bearing the brunt of the firings, while employment grows in emerging markets such as Dubai and China.

New York has lost 10,000 financial services jobs since last August, a 3.5 percent decline, according to the Bureau of Labor Statistics in Washington. Those figures don't tell the whole story because employees receiving severance remain on payrolls.

The Independent Budget Office in Manhattan said in a report issued last week that it expects 33,300 finance jobs in the city, or 7.1 percent of the total, to be cut from the peak in 2007. The industry lost 52,500 jobs in New York during the 2000- to-2003 market drop, or 17 percent, Bureau of Labor Statistics data show.

London will suffer 19,225 finance job reductions in 2008 and 2009, or 5.4 percent of the total, according to estimates from the Centre for Economics and Business Research in London. That compares with 15,340 jobs, or 4.7 percent, from 2000 to 2002, the CEBR's data show.

Won't Match 2001

Job cuts in New York probably won't match those of 2001 and 2002, when losses accelerated after the Sept. 11 terrorist attacks, said Marisa Di Natale, senior economist at research firm Moody's Economy.com in West Chester, Pennsylvania. She's forecasting that the New York metro area will lose 45,000 financial jobs this time, or 7.7 percent, compared with 60,000 jobs, or 10 percent, in the previous decline.

``In the run-up to the dot-com bust, there was a very frenzied pace of hiring on Wall Street, and we didn't have that this time around,'' Di Natale said. ``And in the last recession, there were a lot of back-office jobs cut or moved overseas that never came back.''

Still, financial companies are suffering deeper losses than earlier this decade. Morgan Stanley and Bear Stearns, which remained profitable throughout the previous decline, reported their biggest losses last year. Merrill Lynch & Co., which had one quarter of losses in 2001, has reported three straight unprofitable quarters.

Falling Profits

``We've never seen writedowns like we're seeing now and such big losses,'' said John Challenger, chief executive officer of Chicago-based outplacement firm Challenger, Gray & Christmas Inc. ``More job cuts will come. Even with the market's optimism recently, I don't think we can safely say that we're out of the woods yet.''

Merrill reported a $2 billion loss in the first quarter, while profits tumbled 42 percent at Morgan Stanley, 53 percent at Goldman and 57 percent at Lehman Brothers Holdings Inc. The four New York-based companies are the biggest U.S. securities firms.

Analysts estimate that revenue and profit will drop again in the second quarter. Three analysts are predicting that Lehman, whose shares are down 45 percent this year, will report its first loss since the credit crisis began.

``Salaries and bonuses are the largest expense that Wall Street firms have, and when they don't make money, they have to look to cut,'' said Len Blum, 50, who has worked on Wall Street for more than 21 years and is now managing director at Westwood Capital, a 13-year-old investment bank in New York. ``People have a lot of fear of losing their jobs.''

`Waves of Firings'

The scale of job reductions doesn't yet mirror the scale of the financial losses, said Jeanne Branthover, managing director of Boyden Global Executive Search in New York.

``I don't think the waves of firings have ended,'' Branthover said. Losses started in the credit markets, and they're now ``going into all these other areas,'' she said.

As the outlook darkens, the pace of layoffs has increased. Zurich-based UBS AG and Lehman have unveiled more job cuts this year than during 2001 to 2003. Morgan Stanley, after cutting 900 jobs in 2007, is shedding about 3,540 this year. Goldman, which didn't announce any dismissals last year, has eliminated more than 1,500 positions so far in 2008.

``There are still more writedowns that may have to be taken,'' said Samuel Hayes, finance professor emeritus at Harvard Business School in Boston. Banks and securities firms ``will throw over people the way that they throw over any other cost,'' he said.

U-Shaped Market

Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York who is a former chief financial officer at Lehman, said the recent job cuts in areas such as equities show that management doesn't expect business to improve anytime soon.

``They seem to be positioning themselves for a U-shaped recovery, not a V-shaped recovery,'' Hintz said.

At Columbia Business School in New York, none of the graduates taking Wall Street jobs, except those who accepted positions at Bear Stearns, have had their offers rescinded or renegotiated as they were in 2001, said Regina Resnick, managing director of the school's career-management center.

``My anticipation is that we may see something more like what we had in 2002 or 2003, but we're not there yet,'' Resnick said. Job offers for the school's 700 new graduates were ``down from the summer of 2007, but it still was what we consider to be a strong year,'' she said.

That's no consolation for Tom Curialle, 50, a 20-year veteran of Wall Street who lost his job at Bank of America Corp.'s asset-backed and mortgage-backed bond-sales division in October and hasn't found work since.

``I would have to describe this as the most difficult period I've ever seen,'' Curialle said. ``Nobody feels safe.''

To contact the reporter on this story: Christine Harper in New York at http://www.bloomberg.com/apps/news?pid= ... refer=home