35,000 jobs cut from financial services in September

About 35,300 jobs were cut from the Canada’s financial services sector last month, suggesting recent economic and stock market turmoil could be taking its toll on the industry.

“I think a lot of companies right now, especially financial, they know what’s going on worldwide — the debt situation — and they’re sitting tight,” Cardwell said.

Bank of Montreal economist Robert Kavcic said the number of lost jobs in finance, insurance, real estate and leasing last month was a record.

“The why is the mystery,” he said.

“What we’re seeing in the sector profit-wise, it doesn’t really jive with a sustained downturn in the sector, not yet.”

Kavcic cautioned against reading too much into the monthly numbers, which can fluctuate wildly, adding that many of those jobs could be recovered in the October figures.

Still, the financial sector losses stands in stark contrast to an otherwise promising report that showed the economy added 61,000 new jobs in September, taking the unemployment rate to the lowest level since December 2008 at 7.1%.

The vast majority of jobs lost in the sector — some 29,000 — were in Ontario and the losses were balanced evenly between the finance, insurance and real estate sectors, he said. The losses could have a big impact on the unemployment rate in Toronto, the hub for many of Canada’s banks and insurers.

The financial sector makes up about six per cent of the Canadian job market.

Jobs in that sector have fallen 1.4% compared to a year ago, according to Statistics Canada. Prior to last month, the sector was up 3.5% year over year.

“We were seeing pretty strong growth in the past year and then all of a sudden, bang — it’s all gone,” Kavcic said.

Fears about another global recession escalated in August and September as it became increasingly clear that Greece is likely to default on its debts, which could leave a number of European lenders on the hook.

The crisis has rocked stock markets around the world. The Toronto Stock Exchange lost 12% of its value in the third-quarter alone, with banking stocks being particularly hard hit as investors grew concerned about whether Canadian banks are exposed to European debt.

A decline in a company’s stock can signal that its prospects for growth have stalled and it may start looking for ways to cut costs. That can lead to layofffs.

Michael Burt, an economist at the Conference Board of Canada, said that when investors pull out of stocks, demand drops for personal wealth managers, loan officers and other financial workers.

Financial institutions have made productivity gains since making job cuts during the recession, meaning they’ve increased growth without additional hiring.

And although banking activity has picked up since the recession, it is still not booming, Burt added.

“The industry definitely has some areas where there is restraint and, add in the fact that they do seem to be experiencing productivity gains, then you’re not seeing any improvements in employment,” he said.

There are also concerns about the health of the global banking system and fears that if European lenders take a hit from eurozone countries defaulting on their loans, that could cause a contagion effect and freeze lending around the world.

“There’s definite signs that confidence is waning and, in that situation, businesses tend to be more cautious with hiring, more cautious with their investment plans,” Burt said.

Industry association groups said they do not keep track of monthly jobs data, making it difficult to tell where and why people were let go.

Global banks such as HSBC, Goldman Sachs, Bank of America and others have been announcing layoffs recently.

Big banks aren’t raking in the fat profits they used to earn from large bets on risky trading and complicated investments, which backfired and fuelled the global financial crisis of 2008-2009. Large shareholders are now pressing for cost cuts to improve returns.

So far, however, the big Canadian banks, which have weathered the financial crisis better than their international peers, have not announced any significant job cuts.

Canada’s 100,000 realtors have also been feeling a squeeze as activity in the housing market slows from its post-recession peak, meaning there’s less commission to be made from fewer homes sold.

It has also taken a hit from an increasing number of owners selling privately and realtors who offer a la carte services, moves that also limit commission possibilities.