Wall Street Misses Jobs Rebound as Cost Cutting Continues
NEW YORK (TheStreet) -- Bank stocks opened with strength on Friday, following a greatly improved set of national employment numbers, but banking industry employment growth lagged other service sectors, and the situation is likely to get worse.
The Bureau of Labor Statistics on Friday said that U.S. nonfarm payrolls grew by 146,000 during November, blowing past the consensus expectation among economists of a 93,000 rise in employment, according to a Reuters survey.
The U.S. unemployment rate in November declined to 7.7%, which was its lowest level since December 2008. Economists had expected the unemployment rate to stay at 7.9%.
Private service-providing industries saw their payrolls grow by 169,000 during November, mostly in trade, transportation and utilities, with 69,000 added positions, while 52,600 retail positions were added. Not surprisingly, in light of the Hostess debacle, which led to the loss of 18,000 jobs, there was a net loss of 12,300 food manufacturing jobs.
Total employment growth in the broad "financial activities" category was just 1,000 positions, with commercial banking payrolls growing by just 2,000, while the "securities, commodity contracts and investments" category was flat. Insurers saw their employment rolls grow by 4,000.
The anemic employment growth in financial services will no doubt be good news for the shareholders of large banks, in the hopes that efficiency improvements will drive earnings growth during 2013 and 2014, or at least mitigate the effect of narrowing net interest margins, but the picture is rather grim for financial industry workers.
Many of the largest U.S. banks have branded long-term cost-cutting programs in place, including Bank of America (BAC) , with "Project New BAC," Wells Fargo (WFC) , with "Project Compass," KeyCorp (KEY) , with "Keyvolution," and SunTrust (STI) , with its "Playbook for profitable growth."
While the company does not have a branded cost-cutting program in place, Citigroup (C) has taken a very heavy hand in right-sizing its balance sheet and lowering its personnel costs, through the long-term runoff of assets placed in its Citi holdings subsidiary. This process is being accelerated under new CEO Michael Corbat.