State may lose 7,200 jobs in finance

Trouble projected to last through '09

The collapsing stock market and weakening economy will cost the Massachusetts financial services industry 7,200 jobs, or 4 percent of its workforce, through the end of 2009, according to a forecast by Moody's Economy.com.

Some of the state's largest employers are considering job cuts, including banks undergoing mergers and mutual fund firms whose assets have fallen with stock market declines.

"They're seeing big drops in the equity markets and I think those types of firms are going to take a hit," said Gus Faucher, director of macroeconomics at Economy.com, a Pennsylvania research firm.

The financial and insurance sector has already shed 900 jobs in September and now has 179,800 in Massachusetts, or 5 percent of the state's total workforce. Massachusetts is projected to lose a slightly higher proportion of financial jobs than the country as a whole, according to Faucher.

Alan Clayton-Matthews, University of Massachusetts at Boston economist, noted that losses in the higher paying financial sector can ripple through the larger economy. Limousine services that rely heavily on the financial sector have already cut workers this year, for instance, and restaurants, and other service businesses may stand to lose, too.

On the other hand, Clayton-Matthews said many financial workers are highly educated and will have an easier time finding new work than lower-skilled workers. Also, he said, many of the financial jobs could come back quickly if the stock market recovers. The sector in Massachusetts is still smaller than at its peak in January 2002, when it had 188,200 jobs.

"The silver lining is 7,200 is less than the losses in the last cycle," when the state lost 14,400 jobs in the industry, he said.

Some industry officials point out that many Boston firms have business that is not directly involved in the securities markets, such as administering corporate retirement plans, and so may not be as hard hit as New York, where Wall Street investment banks are reeling from mortgage and credit-related losses. New York City's comptroller recently predicted a loss of 35,000 jobs in the city's financial sector.

Earlier this week Boston mutual fund giant Fidelity Investments acknowledged it is studying cost-cutting efforts, but declined to comment on reports it may cut up to 4,000 jobs of its national workforce of 45,500. The company has 11,500 workers in Massachusetts.

Also, Bank of America Corp. of Charlotte, N.C., which has about 8,000 workers in Massachusetts, is merging its big wealth management unit in Boston with operations of the New York investment broker it is buying, Merrill Lynch & Co. In a letter last week to US Representative Barney Frank, the Newton Democrat, Bank of America chief marketing officer Anne Finucane acknowledged that "with the onset of what appears to be a serious recession, employment levels across the company and across the country may be adversely impacted in the year ahead." But she pledged that New England would not be "disproportionately affected" by whatever ultimately happens at the bank, and wrote that there are no plans for a major relocation of wealth-management jobs now in New England.

In addition Spain's Banco Santander said it is studying cost cutting and efficiencies at Sovereign Bancorp., the Pennsylvania institution it moved to purchase earlier this month. With 232 branches, Sovereign is the third largest bank in Massachusetts.

And in May, student lending firm First Marblehead Corp., of Boston said it would lay off about 500 employees, or more than half its workforce, after the main market for its securities dried up.

Darlene DeRemer, head of the Boston office of financial sector investment bank Grail Partners, expects the problems affecting investment banks in New York will ripple through the financial sector and hurt asset managers around the country. Investment managers get paid based on the value of their holdings, so as stock and bond returns fall, so does their income.

Already, several publicly traded mutual fund companies have seen their stock prices plummet on the expectation of declining profits. The stock of Janus Capital Group of Denver, for example is down 68 percent so far this year and the company last week said it would lay off more than 100 employees.

But several local firms say they do not intend to cut staff, including Affiliated Managers Group of Beverly and TD Bank, the state's fourth-largest bank with 161 branches.

A spokeswoman for State Street Corp., the big Boston financial services company, said in a statement that "We will be managing expenses carefully going forward, in light of the current slowdown in the market environment, to ensure we continue to keep the company strong and positioned for future growth." It has 28,900 workers worldwide including about 13,900 in Massachusetts.

Faucher arrived at his forecast of 7,200 job cuts in the next 14 months by comparing how employment in Massachusetts has compared to national employment trends.

Once the set hits a low point at the end of 2009, Faucher expects job growth of several thousand by the end of 2010 as the economy and markets recover.

Nationally, Faucher said he expects jobs in the financial and insurance category to fall by 162,000 positions, or 3 percent, to 5.81 million by the end of next year. New York state will take the greatest hit, losing 36,000, or 6 percent, of its current workforce of 496,000 people, he estimated.

Last week, Goldman Sachs Group said it would lay off 10 percent of its 32,500 employees. Chicago consulting firm Challenger Gray & Christmas Inc. counted 111,201 layoffs involving financial jobs disclosed so far this year.

John Challenger, the firm's founder, said that privately controlled financial firms, such as Fidelity, might be better able to resist job cuts since they don't have to respond to Wall Street pressures to always increase profits. Nonetheless, he expects few firms to escape the budget ax.

"Their profitability is going to decline; that will mean pressure on their costs. Inevitably, in a service business that comes back to their people," he said.

Ross Kerber can be reached at kerber@globe.com.