Analysis: Citi cuts don't signal economic woes
- Citigroup to cut 11,000 jobs globally, about 4.2% of workforce
- About 4,600 of the job cuts will be in North America, most in U.S.
- Layoffs at U.S. companies have slowed throughout 2012
Does Citigroup's announcement Wednesday that it will lay off 11,000 workers mean big job cuts will once more take the starch out of the U.S. recovery? Probably not.
The Citi (C) headlines obscure that big layoff announcements, of even larger staff cuts, were made earlier this year. And some companies eliminate jobs, even during a recovery.
Chicago-based Challenger, Gray & Christmas outplacement firms says big, announced layoffs have slowed through most of this year – from 53,000 in January and a peak of almost 62,000 in May to 47,724 in October.
The November survey, due out Thursday, will be dominated by the 18,500 planned job cuts at Hostess Brands, Challenger Gray spokesman Jim Pedderson said.
"We're definitely seeing an uptick at the end of the year," Pedderson said. But, he added, "the third quarter was the lowest quarter for layoffs we've had in a while."
About 4,600 of Citigroup's planned 11,000 layoffs will be in North America, with the majority in the U.S.
CEO Michael Corbat said in a statement that the company is cutting in businesses where its expansion hasn't generated returns and focusing on areas with the greatest potential.
Citigroup will take a fourth-quarter $1 billion restructuring charge and is expected to save about $900 million in 2013 expenses and $1.1 billion in 2014.
Wednesday's announced job cuts may not be Citigroup's last. Mike Mayo, a Credit Agricole Securities analyst and long-time critic, says the nation's third-largest bank requires a "significant restructuring."
Just six weeks into his job as CEO, Corbat's move "is a step in the right direction.,'' Mayo said in an interview Wednesday on financial news network CNBC. The company needs to exit some unprofitable, slow-growth businesses, Mayo said.
"There's a new CEO and a new chairman and a new philosophy. Management is willing and able to take the tough action for sustained growth," Mayo added.
In all of its divisions, from consumer banking to trading and investment banking, the layoffs appear to be falling disproportionately on back office and technology support workers, according to Citi's statement.
Also mitigating the impact on the U.S. economy is that some of the layoffs will come from shrinking or ending Citi's consumer banking presence in nations such as Pakistan, Paraguay and Turkey.
Like most of its rivals, Citi has more workers than it needs to serve the number of customers it has. Corbat said in a statement that the company is cutting in businesses where expansion hasn't generated returns and is focusing on areas with the greatest potential.
It's Corbat's job to make moves like that, even when they're harsh. The bankruptcy of Twinkies maker Hostess Brands, that for years seemed to settle for half-measures instead of bolder change, shows what can happen if executives delay the tough calls for too long.
Citigroup shares were up more than 8% in afternoon trading Wednesday. Other banking stocks also rallied, including Bank of America (BAC). Its shares rose more than 6%.