In a competition that no business sector wants to win, the country's financial services companies are cutting more jobs than the ever-shrinking U.S. auto industry.
Since August, the financial services business has chopped 102,000 jobs, according to workforce specialist Challenger Gray & Christmas in Chicago. Meanwhile, the automotive sector has cut 80,323 positions during the same timeframe, according to Challenger's data.
In recent weeks, the financial services industry's woes have surged, along with the certainty of more job cuts to come. Recent troubles include: Investment house Lehman Brothers filing for bankruptcy protection and Merrill Lynch merging with Bank of America. Moreover, staggering Wall Street stalwarts Goldman Sachs and Morgan Stanley announced they would soon become bank holdings companies, and will be cutting costs.
These events, plus the possibility of a Washington Mutual buyout and whatever other unexpected calamity comes down the pike, promises to accelerate the number of jobs cuts. Some industry sources estimate that over 200,000 positions will soon be gone--nearly 10 percent of the entire financial services-related workforce, ranging from bank tellers to CEOs.
So far, King of the Lay-offs is Citigroup, a banking company that has been absent from the latest round of forced mergers and bailouts. Through August, Citi cut 19,859 positions as recently-named CEO Vikram Pandit aggressively restructured the nation's first mega-bank by cleaning house of predecessor Charles Prince's top managers, selling assets and reorganizing business lines. This week, a Prince protegÃ©, Sallie Krawcheck, resigned as head of Citi's Global Wealth Management Group.
As expected, mergers have not been good news for many employed within the contracting financial services sector. About 9,000 job cuts were announced when JP Morgan took over Bear Stearns, while 7,500 positions are getting chopped at Bank of America because of its acquisition of mortgage lender Countrywide Financial.
The crush of financial services job cuts is pressuring Wall Street's hometown of New York City, where because of the job losses at least $3 billion in annual tax revenues will be lost -- compounding the downturn's devastating impact on real estate sales and other services.
Still, nobody should be foolish enough to think the financial industry's meltdown is limited to New York City. Job reductions are infecting the entire country. For example, fallout from the subprime mortgage debacle claimed nearly 36,000 California-based jobs and about 6,800 positions in Florida through August, according to Challenger.
Meanwhile, the Rust Belt is coping with its own crisis within the domestic auto business.
With U.S. auto sales plunging this year, car-makers have launched another round of belt-tightening job cuts, amounting to about 80,000 reductions. Already that rate exceeds 2007's estimated 70,000 job cuts, reports Challenger.
At the current rate, the U.S. auto industry is on pace to break the 110,000 job-loss mark in 2005.
Going forward, it's a toss-up whether the financial sector or auto industry ultimately win this race in 2008. On thing is certain: Either way, the U.S. economy loses.