Riskon in the News
Wall Street financial powerhouses and some of the country's top telecoms firms took an axe to jobs this week, casting a vote of no-confidence in the slumping U.S. economy and its prospects for recovery.
Merrill Lynch and Co. Inc. (NYSE:MER-news), the top U.S. full-service brokerage, said on Thursday it had cut 2,300 jobs in the third quarter on top of the 3,800 staff cuts it announced for the first half, while Bear Stearns (NYSE:BSC-news), another brokerage, said it would trim 7 percent of its workforce, targeting reductions in its technology, trading, sales and banking departments.
Cuts in the financial sector were mirrored by the slashing of jobs in the telecoms industry, where firms have been feeling new pressure from a slowdown in spending on luxury items like high-speed Internet lines and second telephones.
BellSouth Corp. (NYSE:BLS-news), the country's third largest local telephone firm, said on Thursday it would shed 3,000 jobs, the day after long-distance giant Sprint Corp. (NYSE:FON-news) unveiled plans to cut 6,000.
Nearly 700,000 job cuts have been announced in recent months by companies around the world, with U.S. firms hardest hit amid slowing growth and plunging demand.
In terms of the overall jobs market, particularly in the financial sector, this is as bad as we have ever seen it in terms of raw numbers of cuts and the speed with which it is being done, said Barry Honig, President of Riskon, an executive search and consulting firm.
Merrill, which was forced from its headquarters in New York's financial district after the World Trade Center attack last month, warned that more jobs could be hit at the end of the year, when it completes a review of its business units.
We are not sized appropriately for the times we see ahead, Chief Executive David Komansky told investors on a conference call.
The Sept. 11 attacks have added to the woes of the financial sector, which was already facing one of its toughest periods since the Great Depression.
Some parts of the financial sector (mortgage banking and insurance services (continue to hold up well. But the securities business, the bread and butter of many Wall Street firms, is in a tailspin.
Initial public offerings and mergers and acquisitions activity (two areas which fuelled a dazzling run for New York's financial titans during the late 1990s)have now all but dried up, leaving the sector scrambling to unwind the jobs it added at its dizzying heights.
You ramp up when business is good, but when things slow down you throw it into reverse, said John Challenger, head of Chicago-based international outplacement firm Challenger Gray & Christmas.
The U.S. economy is slowing fast and the U.S. Federal Reserve has responded with nine rate cuts, bringing its key short-term rate down to 2.5 percent.
STEEPEST LOSSES IN A DECADE
Despite the Fed, the U.S. economy suffered its steepest job loss in a decade last month. And on Thursday the U.S. Labor Department report showed that more Americans were claiming state unemployment benefits than any time in the last 18 years.
The U.S. telecommunications industry, already hurting from stiff competition and price wars, has been hit hard as corporations have scaled back their financial outlays and fired workers.
That has cut the volume of voice, data and video traffic traveling across long-distance networks, and trimmed the number of local telephone lines in use.
We have to work harder to win a customer now because of the economic pressures even if there weren't the attacks and anxiety, Bellsouth Chief Financial Officer Ron Dykes told Reuters.
The securities and telecoms sectors are among the worst hit but by no means the only industries undergoing major retrenchment.
Life insurer and money manager MONY Group Inc. (NYSE:MNY-news) announced job cuts of its own on Thursday, saying that sliding stock markets had hit its retail brokerage, money management and venture capital operations.
Tool and hardware maker Stanley Works (NYSE:SWK-news) said it would cut 10 percent of its workforce and Boeing Co. (NYSE:BA-news), the world's largest aerospace and defense firm, reaffirmed plans to cut 20,000 to 30,000 jobs in its commercial jet business by the end of next year.
Blue chips like Sun Microsystems Inc. (Nasdaq NM:SUNW-news), Xerox Corp. (NYSE:XRX-news) and Goodyear Tire & Rubber Co. (NYSE:GT-news) have all announced cuts in the thousands since the start of the month.
In some industries, like commercial aerospace, analysts say it is too early to look ahead to a recovery. In others, market watchers say there is still hope for a turnaround next year.
What I am hearing is that in the second quarter of next year firms in some sectors will be looking to expand again, said Honig of Riskon. But before that they have to get through the cuts and see the end of year numbers.