NEW YORK (Reuters) - Citigroup Inc, Merrill Lynch & Co and Wachovia Corp this week announced 12,400 job cuts, and the number of pink slips is likely to rise as losses mount and the economy works its way out of its malaise.
So far this year, 36,000 job cuts have been announced in the U.S. financial services sector, according to job placement consultancy Challenger, Gray & Christmas, Inc. The figure does not include Citi’s announcement on Friday to cut another 9,000 jobs.
Job losses will surge well beyond the current level, given that the latest data does not account for widely expected cuts among the 14,000 employees at Bear Stearns Cos following the investment bank’s pending takeover by JPMorgan Chase & Co.
The cuts will have an oversized impact on New York City, whose fortunes are closely tied to Wall Street. Everything from Manhattan real estate prices to high-end restaurants and private car services could come under severe pressure, as highly paid investment bankers and traders face job losses.
The securities industry accounts for almost 35 percent of all salaries and wages in the city. Many bankers and brokers earn a base salary of $200,000 or more, and get even bigger bonuses.
“It is almost inevitable that we are going to see significant layoffs,” said Octavio Marenzi of financial consulting firm Celent.
Citigroup’s latest job cuts, as it posted a $5.11 billion quarterly loss on Friday after taking billions of dollars of write-downs related to mortgages and turmoil in the credit markets, follow its announcement in January to cut 4,200 jobs.
On Thursday, Merrill, the world’s largest brokerage, announced $9.7 billion in write-downs, on top of $25 billion taken in the second half of last year.
Merrill said it planned to cut an additional 2,900 jobs. In the first quarter, Merrill slashed about 1,100 positions.
Wachovia, the fourth-largest U.S. bank, said this week it plans to eliminate 500 jobs from its corporate and investment banking division.
But as the wave of loan losses continues to grow in a slowing U.S. economy and still-tight credit conditions, Wall Street may be in for a rude awakening.
Global financial institutions have so far sustained well over $200 billion of write-downs and credit-related losses, with the ailing U.S. housing market a central catalyst.
Billionaire investor George Soros last week said global losses are likely to top $1 trillion from the subprime mortgage crisis, which he called the “worst financial crisis of our lifetime.”
Already, Marenzi expects at least 100,000 job losses at U.S. commercial banks, or companies that lend or collect deposits. That figure could rise to between 150,000 and 200,000 in the next 12 to 18 months, he said.
“Banks have been reluctant to reduce headcount because they are waiting for a turnaround,” Marenzi said. “I don’t think we will see a huge uptick, and if anything, conditions are actually deteriorating, not improving,” he added.
In 2007, the entire U.S. financial services sector, consisting mostly of commercial banks, announced a record 153,105 job cuts, according to Challenger, Gray & Christmas.
Job losses in London’s financial district, the City, are likely to hit 40,000 due to fallout from the U.S. subprime mortgage crisis and global credit crunch, analysts at JPMorgan recently projected, doubling their previous estimates.
Reporting by Jennifer Ablan and Joan Gralla in New York and William Kemble-Diaz in London; Editing by Leslie Adler