While restaurants and retailers were laying off their workers at the onset of the COVID-19 pandemic, banks embarked on a hiring spree in the weeks that followed.
The white-hot real estate market and popular federal small-business loan programs sent banks scrambling to find bodies to handle the surge in demand. The six largest U.S. banks added nearly 60,000 workers from January 2020 to mid-2022, according to a CNBC analysis of financial reports.
Now, the opposite is taking place: food and hospitality businesses are rapidly filling jobs – or trying to – as they climb out of the pandemic hole. Meanwhile, financial companies are laying off the workers they once clamored for, as lending slows.
Nationwide,
Bank of America Corp. reported 3,000 fewer workers as of June 30, compared with two years prior. JPMorgan Chase & Co. and Wells Fargo & Co. recently revealed plans to trim hundreds from their home-lending operations.
The cutbacks are happening close to home, too.
Santander Bank N.A. laid off nearly 200 employees from its East Providence office in April after deciding to close down its U.S. residential mortgage business. Overall, the financial services industry, which also includes insurance and real estate firms, was down by 600 jobs in Rhode Island as of July, compared with a year ago, according to the
R.I. Department of Labor and Training data.
Financial analysts and economists aren’t surprised. Banks, particularly those with strong mortgage businesses, follow the ebb and flow of the market, and the easiest way to “cut the fat” when activity slows is to shrink the workforce, says Michael Ice, a senior finance lecturer for the
University of Rhode Island.
“At a bank, your assets leave on an elevator every night,” Ice said. “Your assets are people, so if you’re not writing mortgages or loans, then just get rid of people.”
It’s a callous business model, Ice acknowledges, which might be why banks don’t want to talk about it. Santander, JPMorgan and Bank of America all declined or did not respond to inquiries for interviews for this story. But it’s part of what makes banks able to keep up in a fickle economy, Ice says. It’s a lot easier and faster to cut costs by firing people than to unload warehouses of spare machinery, for example.
The same phenomenon played out to an even larger degree during the 2008 recession. Wall Street lost some 186,000 jobs in the 18 months after the subprime mortgage meltdown rocked financial markets, according to some reports. In Rhode Island, financial services jobs plummeted nearly 14%, from 36,000 to 31,000, between the end of 2007 and 2009, the DLT said.
The sudden and crushing job loss was in part a symptom of the meltdown. But even as the economy recovered, not all those finance jobs returned. Market cycles aren’t the only cause for the slow, steady shrinkage of finance jobs over the last decade.
“The industry is consolidating in general,” said Peter J. Nigro, financial services chair at
Bryant University.
One big reason, Nigro says, is the growing battle for customers between traditional banks and financial technology firms.
“When you compare banks to nontraditional finance players, they are subject to a lot more regulations and expenses,” Nigro said. “That forces them to trim whatever they possibly can.”
Technological advances have also helped banks achieve more with fewer people.
Indeed, it’s not just mortgage lenders who are losing their jobs but also bank tellers, security guards and other in-branch jobs that are quickly becoming obsolete in a time where many customers conduct banking from a smartphone or computer.
“You can walk into a bank and there’s room for 20 tellers but only three people there,” said Donna Murray, DLT’s assistant director for labor market information.
Not all banks are turning to layoffs to manage technology changes and economic downturns.
Take
The Washington Trust Co. The Westerly-based bank has tried not to hire and fire workers in reaction to rises and dips in financial markets as larger banks have. Kristen L. DiSanto, the company’s senior vice president and chief human resources officer, says the company wants to stay true to its values of creating a positive work environment.
“We don’t want to be constantly hiring and then laying people off,” DiSanto said.
Instead, Washington Trust, which employs about 650 people, reassigns its workforce based on need; when the bank was inundated with waves of applications for Paycheck Protection Program loans in 2020, it shifted many of its project management team to help wade through the flood of applicants. Branch tellers who were unable to return to work because their children’s school was still being held remotely might have been offered a chance to help with mortgage loans.
With new branches and expanded back-office roles to help with upcoming credit challenges, the bank is increasing its headcount – up about two dozen workers compared with the start of the pandemic, with another 38 openings, DiSanto says.
Finding workers to fill those open jobs has been harder and has taken longer. But if other banks keep shedding staff, that could be an unexpected talent pool for Washington Trust to tap.
“We absolutely are already getting candidates who were laid off,” DiSanto said.
