The blizzard of pink slips in the US financial services sector intensified yesterday with the announcement by Charles Schwab that it was cutting up to 2,400 employees, or 11 per cent of its workforce.
Business has steadily dried up this year for the biggest online and discount US brokerage because of plunging stock markets. Last July, Schwab was attracting 217,000 trades a day; in July this year that had dropped to 124,200 a day. The San Francisco-based company has already laid of 3,400 staff from its original 26,700 workforce.
"Given the severity of the pullback in client activity and our outlook regarding the potential duration of this environment, we are taking further measures to improve our financial performance while maintaining appropriate capacity," founder and co-chief executive Mr Charles Schwab said.
The biggest US banks, brokerages and investment banks have all let staff go in recent months. JP Morgan Chase is preparing to lay off an extra 3,000 employees on top of 5,000 announced earlier. Goldman Sachs, Morgan Stanley, Citigroup and Merrill Lynch have also issued hundreds of pink unemployment slips as fees slump in the absence of highly-profitable mergers, acquisitions and IPOs.
Global fees on mergers and acquisitions have fallen an estimated 54 per cent. Bear Sterns has reported a 50 per cent drop in revenue.
Schwab and rivals Ameritrade and TD Waterhouse have been particularly hard-hit by the exit of disillusioned small retail investors, who suffered badly in the collapse of the Nasdaq bubble. New York-based TD Waterhouse last month fired 600 employees, or 9 per cent of its payroll, and closed 17 branches. The tech-heavy Nasdaq has lost 55 per cent of its value since last August and continues to flag. "No one's trading," said Mr Sheldon Grodsky of Grodsky Associates, a New Jersey brokerage. The unemployed financial workers are finding that job opportunities are drying up across the board in the US.
While the number of new jobless claims fell slightly last week, the Labour Department said the number of people remaining on benefit is at its highest level in nearly nine years.
