Slumping home sales and a credit crunch led to massive layoffs in the lending and financial sectors in 2007, but the number of announced job cuts in all industries actually declined.
The number of announced job cuts in 2007 — 768,264 — represented an 8.5 percent reduction from 2006, and the lowest since the year 2000, according to outplacement consulting firm Challenger, Gray & Christmas Inc.
Because the Chicago-based firm tracks only publicly announced layoffs, its numbers are not comprehensive but provide an indication of industry trends.
Mortgage lenders announced 86,126 job cuts in 2007, more than six times the number announced in 2006. The wave of job cuts among mortgage lenders spread to investment firms that gambled on high-risk loans as investment vehicles, Challenger said.
The 153,105 job cuts announced by financial sector companies in 2007 beat the previous record of 116,515 in 2001 by 31 percent, and was more than double than the 78,880 layoffs announced in the auto industry.
Announced layoffs in construction were also up sharply, to 36,039, compared with 6,450 in 2006. In real estate, the number of announced layoffs was actually down slightly, from 3,490 in 2006 to 3,275 in 2007.
While the pace of layoffs in the financial sector slowed down in November and December, Citigroup and Merrill Lynch may soon announce major staff reductions, said John Challenger, chief executive officer of Challenger, Gray & Christmas.
Whether the credit crunch in mortgage lending spreads to credit-card debt and sets off another round of losses — perhaps sending the economy spiraling into recession — remains to be seen.
“At the moment, corporate profitability is strong, unemployment remains at a relatively low 4.7 percent, and consumers are still spending money,” Challenger said. “Of course, if consumers and companies rein in spending by a significant amount, it could quickly tip the economic balance toward recession. If that happens, job cuts could increase in 2008.”
Challenger said businesses that could be vulnerable to further job losses in 2008 include banking, construction, consumer products manufacturing, industrial manufacturing, automotive and retail.
With the New Year less than a week old, announcements of layoffs continue. Cleveland, Ohio-based National City Corp. announced Wednesday it would cut 900 jobs as it exits the wholesale mortgage lending business.
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