The new reason behind financial job cuts
It's not a pullback in originations
The financial sector witnessed the highest layoff amount in February compared to other sectors, with the industry announcing plans to cut 9,791 workers in the coming weeks and month, the latest Challenger, Gray and Christmas job cut report found.
This is almost double the 4,817 job cuts announced by financial firms in January, and is the largest monthly number since February 2013, when 21,724 jobs cuts were announced.
However, the jobs cuts were not mainly attributed to the shrinking origination pool and drop in refinance applications.
“While some of the cuts in the financial sector were related to cutbacks in mortgage lending operations, a large portion of the banking workforce reductions in February were due to the ongoing shift away from branch banking toward increased mobile banking,” said John Challenger, CEO of Challenger, Gray & Christmas.
“This is a trend that is gaining momentum and undoubtedly will have a profound impact on banking employment levels in the coming years,” Challenger said. “The number of bank tellers and traditional banks will continue to shrink as more people manage their bank accounts over their phones, on their laptops, and at ATMs and kiosks.”
What is interesting is that these cuts are not due to a recession or drawback, and instead it is successful companies taking proactive steps to adjust to new realties, Challenger explained.
This follows recent reports from companies like JPMorgan Chase (JPM) that have announced a lot of recent job cuts. JPMorgan reported that it is expected to reduce employee headcount in mortgages by 6,000 in 2014, adding to a total predicted reduction of 8,000 jobs at the bank.
“These are proactive moves by JPMorgan Chase CEO Jamie Dimon in recognition of the coming sea change in the way people bank. The bank has shifted from a ‘branch-building' strategy to an optimization strategy,” Challenger noted.
“In other words, Chase will have more places to bank, but technology will replace tellers for day-to-day banking. Meanwhile, the bank promises to provide more personalized asset-management services for those seeking more financial planning guidance,” he continued.
The next closest sector behind the financial industry was the telecommunications division in February, cutting 5,147.
But as a whole, job cuts are slightly down as employers announced plans to cut payrolls by 41,835 in February, 7.3% lower than 45,107 in January and 24% below 55,356 in February 2013.
In fact, this is the lowest February total since 35,415 job cuts were announced in 2000.
Looking at jobless claims, another economic report that came out Thursday morning by the U.S. Department of Labor reported that claims dropped by a lower-than-expected 26,000 filings to 323,000 amid heavy weather eases, Econoday noted.
The four-week moving average was 336,500, a decrease of 2,000 from the previous week's revised average of 338,500.