Merrill Lynch & Co. said Thursday, April 17, that it would cut an additional 3,000 employees on top of the 1,100 it has already let go this year. Meanwhile, CIT Group Inc. announced that it reduced its workforce by 500 people, or 9 percent, during the first quarter. The week began with Wachovia Corp. saying that it will sack 500 investment bankers, 12 percent of the total in that unit.
The job cuts are direct consequence of a first quarter that Merrill chief executive John Thain described in a conference call as being “as difficult a quarter as I’ve seen in my 30 years on Wall Street.”
Merrill posted a first-quarter loss of $2 billion, its third consecutive quarter soaked in red ink. It has suffered $14 billion in mostly subprime-related losses over the past nine months, which exceeds by $1.4 billion the amount it generated in net income during the boom years of 2006 and 2005.
Many more job losses on Wall Street are widely expected. In the first quarter Citigroup Inc. targeted 6,000 investment bankers and traders for layoffs. It is likely to unveil a new round of cuts when it reports financial results Friday. Analysts believe the bank needs to shrink by as many as 45,000 people in order to get its costs in line with its peers.
Meanwhile, up to half of Bear Stearns Cos.’ 14,000 employees stand to lose their jobs as the firm is swallowed by JPMorgan Chase & Co., an unusually rapid process expected to be completed by the end of June.
All told, New York City’s Independent Budget Office expects Wall Street firms to shed 20,000 employees locally by the end of next year, which would amount to an 11 percent reduction in the city’s best-paid workforce.
Considering the stiff layoffs already under way at Merrill, Citi and others, the IBO’s estimate for local job losses now seems conservative. But even those numbers would represent the steepest two-year drop since 2002, when 35,000 New Yorkers—18 percent of the city’s securities industry employees—lost their jobs on Wall Street, according to data from the U.S. Bureau of Labor Statistics.
The current decline in employment bodes ill for a wide array of businesses that depend on Wall Street, ranging from lawyers and accountants to restaurants and health clubs. What’s more, business and personal income taxes from Wall Street account for 20 percent of the state’s tax revenues and 9 percent of the city’s, according to the New York state Comptroller’s Office.
Until now, firms like Merrill and Lehman Bros. had made relatively minor cuts in local staff. The ax had fallen hardest in subprime mortgage divisions that had few staffers in New York.
The latest round, however, appears to hit closer to home. Merrill said the 3,000 employees to be pink-slipped in the coming weeks will be targeted in its global markets and investment banking division, which is based in the firm’s World Financial Center headquarters. A spokeswoman declined to say how many jobs will be lost locally.
Including the earlier layoffs in mortgages with the impending losses in banking and trading, Merrill expects its workforce will soon be 6 percent smaller than the 64,000 it boasted on January 1.
Even more layoffs could be coming unless Merrill’s fortunes quickly turn around, a prospect that seems increasingly distant. On April 17, Moody’s Investors Service said the mortgage market is unlikely to improve in the second half of this year and forecast an additional $6 billion in write-downs for Merrill, which has already suffered $18 billion in mortgage-related hits.