Announced Job Cuts In Financial Sector Surges More Than 162%

The job cuts announced by the U.S.-based banks until November in the current year have already surpassed the 2010 announced job cuts and the latest to join the list of announcement in the current year is Citigroup Inc.'s (C) 4,500 job cuts. The company's chief executive officer Vikram Pandit announced this during financial conference held on Tuesday.

The leading financial services provider Citigroup's announcement comes on the heels of Bank of America's announcement in September that it intends to reduce work force by 30,000, which was considered more than double by any single American-based employer until then.

Wells Fargo, Synovus Financial and Goldman, Sachs has also announced job reduction initiative for 1,900, 1,150 and 1,00 jobs respectively.

Globally, banks are indulging in job cuts and as early as November, there were announcements for 110 thousand job cuts that includes Switzerland-based Credit Suisse's 1500 job cuts over its previously announced 2,000 layoffs, while Dutch-based ING and Japan's Nomura announced similar job reduction initiative of 2,700 and 1,000 positions respectively.

Financial Sector Job Cuts

Though the overall announced job cuts increased 6.5% until November over the full last year, the financial sector's role in the job cut swelled over 162% to 56,191 from 21,430 during the same period last year. This is excluding the effect of latest Citigroup's announcement. If this is taken into account, the increase would be more than 180%. Still, Challenger, Gray & Christmas believes there could be more downsizing of jobs in the financial services industry.

But the saving grace is that this is not a worst scenario considering the job cuts announced during the most financial turmoil years of 2008 when the financial sector of ?the largest economy in the world witnessed a record high of 260,110 job reductions. Yet, the sector still remains on a very thin ice even as other sectors started enjoying the fruits of the recovery a! s a resu lt of job cuts.

?Overall Job Cuts Announcement

The total announced job cuts increased to 13.3% to 564,297 until November from 529,973 in the similar period last year. District of Columbia bore the brunt for having the largest lay off location until November followed by California, North Carolina, Michigan and New Jersey.

Reason for Job Cuts

Restructuring, cost-cutting and closing are the three most prominent decisions that made the corporate to pronounce work force reduction. These three decisions took a combined toll of 384,604 job cuts, while economic conditions weighed down for 70,068 job reduction.

Banks are still under the cloud of credit crisis, especially with the European Union scenario throwing winds of different pictures very frequently. The financial sector is also having the problem of millions of foreclosed-on homes lying in their accounts book besides the record weak interest rates. The current credit crisis in the European Union is still looms large in the U.S. based financial sector too. The retail banks are struggling to come out of the woods from the after math of the sub prime crisis and the collapse of housing market.

While various industries can claim that the worst is over, the same is not the situation for banking sector. S&P have already reduced rating for 15 banks and the non-performing assets would only rise if credit crisis worsens.

History of Job Cuts

The job scenario witnessed worst conditions in 2001 when as many as 1.96 million job reduction initiative was mulled. The next four years also recorded job reduction announcement only in excess of one million. After a two-year hiatus, the scene returned to haunt in 2008 and 2009 when the job cut announcement reached 1.22 million and 1.29 million respectively.

Hiring Plans

The silver lining in the existing economic condition is that announced hiring plans witnessed 30% upside over the full last year p! eriod. E xcept for the months of March, May and September, there was an increase in announcement in hiring plans. For the period ended November, the announced hiring plans totals 523,498 compared to full last year's 402,638.

iStock Punch

The financial sector is still reeling under financial crisis and yet to come out of the wounds inflicted on them by the sub prime and housing collapse a couple of years ago. The situation might have shown some kind of an improvement in their financial numbers thanks to the Government's timely intervention, but the effects still remains in the books of accounts. Therefore, the sector is left with no option, but to clean up the balance sheet for halcyon days.

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