Big banks are quietly cutting thousands of employees, and more layoffs are coming, per CNBC.
Throughout the year, the largest American banks have been discreetly reducing their workforce, with some of the most significant layoffs yet to occur. Despite the economy's surprising resilience, many lenders have initiated job cuts or revealed plans to do so. The only exception among the major U.S. banks is JPMorgan Chase, the largest and most profitable of them all.
Driven by challenges related to higher interest rates impacting the mortgage sector, Wall Street deal-making, and funding costs, the five largest U.S. banks, excluding JPMorgan Chase, have already eliminated a combined 20,000 positions this year, based on company filings. These workforce reductions follow a two-year hiring surge driven by the heightened activity on Wall Street during the Covid pandemic.
This hiring frenzy subsided when the Federal Reserve began raising interest rates last year to cool down an overheated economy. Suddenly, banks found themselves overstaffed in an environment where fewer consumers were seeking mortgages, and fewer corporations were issuing debt or engaging in acquisitions.
As we approach 2024, the financial industry's job losses could exert pressure on the broader U.S. labor market. With an increase in defaults on corporate and consumer loans expected, banks are likely to implement more substantial workforce reductions next year. According to Chris Marinac, research director at Janney Montgomery Scott, these cuts are an essential response to the uncertain economic environment in the coming year.
"Banks are cutting costs where they can because things are really uncertain next year," Marinac commented. "They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad. By the time we roll into January, you’ll hear a lot of companies talking about this."
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