Bank of America to cut up to 35,000 jobs and 573,000 file for unemployment

[dhilipkumar]

Bank of America to cut up to 35,000 jobs over the next three years

Bank of America Corp. said Thursday it will eliminate between 30,000 and 35,000 jobs over the next three years due to its acquisition of Merrill Lynch & Co Inc. and a faltering economy that is "affecting the level of business activity" at the bank.

BofA has not completed its analysis and expects to have a final number in early 2009, it said in a statement. A cut of 35,000 jobs would represent up to 10.5 percent of the combined BofA/Merrill work force.

BofA, Greater Baltimore's largest bank, said the reductions will come from both companies and will affect all lines of business and staff units.

The bank said it will make as many reductions as possible through attrition. Severance and other benefits will be provided to employees who lose their jobs and cannot be offered other positions within the bank.

"The reductions are designed to eliminate redundancies created as a result of the merger with Merrill Lynch and to reflect the current recessionary environment," the bank said.

Shareholders approved the Merrill deal, initially valued at $50 billion, last week. BofA executives said they would seek to cut $7 billion in annual expenses, or 10 percent of the combined expenses of BofA and Merrill, and eliminate overlapping back office and support jobs between the two companies.

Charlotte, N.C.-based BofA (NYSE:BAC) has 247,024 employees. New York-based Merrill (NYSE:MER) has 60,900 full-time employees.

More jobs carnage: 573,000 file for unemployment

New claims for jobless benefits surged last week and came in worse than expectations that were already gloomy - and economists say the figures would get even worse without an auto industry bailout.

Initial applications for unemployment benefits rose to a seasonally adjusted 573,000, the Labor Department said Thursday. That was nearly 50,000 more than economists were expecting and up from a revised 515,000 the week before.

The last time so many Americans filed new jobless claims in a single week was in 1982, although the labor force has grown by about half since then.

Adding more damage to the already ravaged labor market, Bank of America said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch, which it agreed to buy in September.

Separately, the U.S. trade deficit rose unexpectedly in October, partly because of dampened demand for American exports. The gap was $57.2 billion in October, up from $56.6 billion in September. Analysts had been expecting a decline because of falling oil prices.

The numbers came as legislation to provide a $14 billion bailout to the auto industry ran into rising resistance from Senate Republicans. Both President-elect Barack Obama and a spokeswoman for President George W. Bush cited the jobless claims numbers in support of the bill.

In unusually stark terms, White House spokeswoman Dana Perino said the economy is so weak right now it "cannot sustain" a collapse of the auto industry. And in Chicago, Obama said an industry shutdown would have a "devastating ripple effect" on the already staggering economy.

The reports, along with investor concerns about the auto bailout bill's future, sent stock markets falling. The Dow Jones industrial average finished down almost 200 points, closing at 8,565.

General Motors Corp. and Chrysler LLC executives have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for federal aid under the bill, has said it has enough cash to make it through 2009.

Automakers and their extensive network of suppliers support about 3 million jobs, and many economists say the bankruptcy of one or more of the Detroit Three would make the unemployment numbers even worse.

It "would have a significant impact at a very bad time," said Laurence Meyer, president of Macroeconomic Advisers and a former member of the Federal Reserve Board.

Besides Bank of America's announcement, more layoffs in other industries were announced Thursday. Tool maker Stanley Works said it plans to cut 2,000 jobs and close three manufacturing facilities.

Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, said it will cut 700 jobs as it outsources parts of its business.

Still, food companies will likely fare better over the next few months than other employers because consumers will buy food and other staples even in a recession, said Madeline Schnapp, director of macroeconomic research at Trimtabs Investment Research.

Most Americans expect the jobs situation to get even worse, according to a poll released Thursday by the Pew Research Center for the People & the Press. Sixty-three percent think unemployment will increase next year, and 73 percent plan to cut back on holiday gifts this year, according to the poll.

The four-week average of new jobless claims, which smooths out fluctuations, is now a seasonally adjusted 540,500. That's the highest since December 1982, when the economy was emerging from a deep recession.

[dhilipkumar]

Survey: Economic recovery won't start for 18 months

A new survey by KPMG LLP reveals that 70 percent of local board members and executives think it will be at least a year and a half -- or mid-2010 -- before the economy starts to recover.

Only 30 percent believe it will be a year or less.

Of the 56 board members and execs attending an audit committee roundtable in Tysons Corner, 25 percent felt the downturn would last 18 months, 29 percent said two years and 16 percent thought it would last three or more years.

Top challenges sparked by the downturn include reduced sales growth and liquidity and access to capital, says respondents.

Much of the discussion focused on how D.C.-area companies are reassessing their entire risk profile, both operational and financial, as a result of poor economic conditions.

"Companies realize that effective enterprise risk management processes can soften the impact of the many challenges they face," said John Keenan, managing partner for KPMG's D.C. office and moderator of the panel, in a statement. "Companies that have a strong cash flow are much more likely to weather the storm and be well-positioned to benefit from the upturn when it happens."

He says companies without a strong cash flow should review their overall cost profile and uncover opportunities to improve cash flow.

Joining Keenan on the panel were execs from AES Corp., The Carlyle Group, Latham & Watkins LLP and others.

Other findings include:

♀ 15 percent were very confident that management has a good understanding of the company's current risk profile

♀ 80 percent say that the current financial crisis has led their board to reconsider the adequacy and effectiveness of their company's governance process for managing risks to the business

♀ 90 percent of respondents were concerned about their company's ability to keep up its competitive position in the emerging business and regulatory environment