Financial firms cutting jobs as mortgage refinancings fall and Wall Street activity slows.
Financial firms are cutting tens of thousands of jobs because of a slowdown in the mortgage business, the sluggish economy, the growth of online banking and new regulations.
The sector announced 49,000 layoffs the first nine months of 2013, most among all industries, outplacement firm Challenger Gray & Christmas said in a report. Challenger expects to report Wednesday the sector was the top job-cutter in October.
Bureau of Labor Statistics data, which tally net job gains or losses after figuring in both layoffs and hiring, also show a downsizing industry. In September, financial companies lost 7,200 jobs after shedding 5,900 the previous month.
The cutbacks represent a reversal from 2011 and 2012 when financial firms had begun contributing to overall U.S. job growth after recovering more slowly than other sectors from the 2008 financial crisis.
Many of the recent job losses stem from the rise in interest rates and resulting decline in mortgage refinancing activity. Rates for 30-year fixed mortgages have risen to 4.13% from 3.35% in May. The Mortgage Bankers Association estimates mortgage refinancing volume will drop to $989 billion this year and $388 billion in 2014, from $1.2 trillion in 2012.
Also, five years after the housing crash, fewer mortgages are delinquent, allowing banks to reduce staffing needed to process the bad loans.
Bank of America has announced 5,900 mortgage-related job cuts since August. Mortgage applications in its pipeline for purchases and refinancing fell 60% in the third quarter vs. the second quarter.
Other banks recently announced layoffs in their mortgage units, including 6,400 by Wells Fargo, 1,100 by Citigroup and 800 by SunTrust.
With refinancing falling, "It's not being made up by (mortgages for) people buying homes," says Citigroup spokesman Mark Rodgers.
The refinancing downturn is not the only reason banks are retrenching. With businesses uncertain about the economy, interest rates and policies in Washington, trading and mergers have slowed, says Jeff Harte, an analyst at Sandler O'Neill.
Business loans also have leveled off. And banks are closing branches and building smaller outlets as consumers bank more online.
Meanwhile, Harte says, new rules have cut the debit card fees banks charge retailers and limited overdraft charges. And the Dodd-Frank reform is adding costs as banks meet stricter standards.
Bank of America and Wells Fargo recently reported third-quarter revenue that was stagnant vs. the year-ago period. Bank of America has slashed about 25,000 jobs the past year, or 9% of its work force, mostly in the U.S. Citigroup is cutting 4,600 jobs in North America this year.
The job reductions have especially affected New York City, where the industry has been a much smaller contributor to the city's jobs recovery than in previous rebounds. Employment in the securities industry was 163,400 in August, 25,600 fewer than before the financial crisis, the New York State Comptroller's office said last month.
Harte says he expects the cuts to continue at a reduced level into 2014.
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