Asset management job loss has been benign, but not for long

Saturday, October 11, 2008

Two more banks were added to the FDIC’S bank failure list and the sytemic breakdown of the banking industry is all but certain for some. However, on balance, this week’s economic reports were not all that bad. The trade deficit continued to weaken in August, pending home sales surged in September, and unemployment claims abated from their post-hurricane surge. However, one of the biggest markets, the labor market, – whose survey ends this week – is likely to show another aggregate job loss. Paradoxically, the breakdown of the asset backed securities market has not broken down its job market....yet. Until now, consolidation and a shifting of workers has kept job loss at a minimum in the asset services ( industry. But that train may have left the station.

In September, the Bureau of Labor Statistics' employment report was bleak:
-159,000 total nonfarm payroll net jobs lost.
+25,000 jobs were added in education and health services.
-27,000 jobs were lost in professional business services.
-37,000 jobs were lost in durable goods manufacturing.
-40,000 jobs were lost in retail.
-17,000 jobs were lost in financial services.

And within financial services, the big net job cuts were in the following categories:
-11,100 jobs lost in financial services and insurance with the bulk coming from securities investment services.
- 7,800 jobs lost in securities, commodity contracts, investments (asset management). Asset management added 1,500 jobs since last year.
- Depository credit intermediaries (banks) saw just a -2,100 net job loss.
-6,400 in real estate and rental and leasing with 50,100 jobs lost since last year.

Clearly, September’s employment report showed broad-based payroll deterioration, where the service-sector has posted five consecutive months of net job loss.

The chart lists the accrued job loss for credit intermediation, and its sub category, financial securities, commodities, contracts, and other financial investment activities (asset services), since December 2007. The credit intermediation industry has cut 44,900 jobs since the beginning of the year, but just 2,500 were in the asset services industry. Depository institutions have cut the bulk of the jobs in 2008. The asset services industry has even added jobs since last year, bit that streak is likely to end.

This is just the beginning: Barclays to cut 3,000 after Lehman deal

With high leverage and the definition of an illiquid asset starting at a AAA corporate bond – or even worse, AA financial 30-day commercial paper - investment firms will have no choice but to cut jobs as the industry sinks with asset values. The stock of clients funds is falling, pushing down billable fees, and eventually (or perhaps not that quickly), asset managers and related asset services will fall. Result: all else equal, worsening employment reports going forward.

Rebecca Wilder


Janie October 11, 2008 at 9:40 AM  

And now the G7 is meeting to buy up stock in those banks, maybe.

Ray October 11, 2008 at 9:58 PM  

I work at Wachovia, there are still millions of jobs posted on employment sites... (networking) (aggregated listings) (matches you to jobs)

good luck to those searching for jobs.

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