If You Think This Year's Bad For Job Cuts, Wait 'Til 2009

As global stock markets rally on the news of the European bank bailout plan, financial markets professionals are still wary about their futures. The global economy is almost certainly in recession, and prospects for business across the board looks grim. And if 2008 has been a difficult year for jobs, 2009 is shaping up to be even worse.

Over in London, UK think-tank the Centre for Economics and Business Research (CEBR) has said that City job losses are likely to increase to a figure of 34,000 in 2009 (compared to the 28,000 estimate for this year). The job losses are expected to cut the number of people employed in London in the financial markets industry to 291,000, the lowest level since 1998. CEBR senior economist Richard Snook said that the credit crunch 'has spread through global markets like a virus and threatens to plunge the world into recession. We therefore do not expect a quick return to the levels of employment and prosperity that the City saw in 2006 and 2007'.

And right on cue, The Financial Times reports that Fidelity International is to axe another 200 jobs in the UK, and that other asset management firms are likely to cut headcount due to a fall off in fees as asset values decline and investors withdraw monies.

And the other big item on the agenda is bank mergers. The current market turmoil has merely re-affirmed that there are still just too many players. CNBC reports that the likes of Citi, Credit Suisse, Goldman JPMorgan, Morgan Stanley and UBS are 'weighing their futures'. The most likely mega-deals are possible tie-ups between JPMorgan and Morgan Stanley and Credit Suisse and UBS. The news agency quotes one unnamed JPMorgan executive who predicted that any merger between his firm and Morgan Stanley would be a jobs 'bloodbath'.

The effective nationalisation of Royal Bank of Scotland (RBS) by the UK government is also likely to result in additional job losses. The merger of the bank's corporates and markets division with ABN AMRO's wholesale banking unit last year was already thought likely to account for 7,000 job losses (the combined unit had a 28,000 headcount at the peak). But, as new RBS CEO Stephen Hester said Monday: 'There are no sacred cows (here)'. With investment banking not thought to be high on the agenda going forward (too much risk, too high compensation), several more investment banker are likely for the chop.

Finally, another example of possible job cuts is over at Wells Fargo. Bloomberg has reported that the bank is likely to sell or 'pare back' the investment banking unit it recently acquired with the Wachovia deal. The news agency quotes Sean Egan, president of Egan-Jones Ratings, who said: 'They have enough to manage without the added complexity of an investment banking operation. Those guys aren't making much money (anyway)'.

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