After the financial crash, a white collar recession
CHARLOTTE, North Carolina – Unlike most of America, many of the people here who have lost their jobs are highly paid white collars in the country’s battered banking sector.
“The impact of these job losses is far greater than your average job because these bankers were making six- or seven-figure salaries,” said Tony Plath, a banking professor at the University of North Carolina in Charlotte. “This represents a structural shift for the economy in Charlotte.”
Charlotte has been known as a banking center for years and until the crisis was dominated by two major banks with headquarters here, Bank of America and Wachovia. With 60,000 jobs, the finance sector was the biggest part of the local economy.
But as the housing bubble burst and pushed the country into recession starting in December 2007, the fast and loose lending practices of the boom pushed banks like Wachovia toward the abyss. In December, Wells Fargo took over Wachovia in a government-brokered sale, thus removing one of the city’s two financial pillars.
“We’ve lost one bank headquarters and we’re still trying to work out what that means,” said Bob Morgan, head of the city’s chamber of commerce. “The other bank is having a change of leadership and we have no idea what that means yet.”
Bank of America is looking for a replacement for Ken Lewis, its beleaguered CEO, who is due to retire by the end of the year.
The unemployment rate here in September was 11.6 percent, above the national average of 9.8 percent. Morgan insists that the city’s economy is diversified and that banking is not as dominant as people make out.
“Mostly what we’re suffering from here is what is affecting the rest of the U.S. economy,” he said. “Once the U.S. economy comes back Charlotte will too.”
But Plath said that for many of the 4,000 people who have lost jobs in the financial sector here, there are no alternatives at the moment.
“It used to be during the boom that you lost your job at a bank you could find another one within 90 days,” Plath said. Now you’re looking at a minimum of nine months.”
“You can’t just walk across the street and get a job because there are no jobs to be had right now,” he added. “For some people the only alternative is to switch to a different industry at a lower level or buy a business. Either way, their salaries are going to significantly lower.”
Richard Daileader, 52, worked for a financial company up in New York but lives in the Charlotte area. He took time off after taking a “separation package” in the fourth quarter of 2008 and is now looking for work here.
“There is nothing out there at the moment,” he said. “But I’m getting indications that there may be some hiring going on in the first quarter.”
Mary Tribble, head of Tribble Creative Group which organizes corporate events in the city, said that revenue fell 40 percent in 2007 and is down 40 percent this year due in large part to the banking sector’s implosion.
“If it weren’t for other businesses that we have developed, we would not have survived,” she said.
The city now has to adjust to a new reality in which not only are there fewer banking jobs, but the one remaining bank may be less likely to spend so much on philanthropic projects.
“The city was too reliant on having the two big banks here,” said Raymond Groth, a managing director at local boutique investment bank Fennebresque & Co. “When there was a problem people looked to Bank of America or Wachovia to solve it.”
“Now Charlotte is going to have to become more diversified,” he added. “But the city will benefit in the long term as a result.”