The refinancing boom has caused a surge in mortgage banking jobs.
The Labor Department Friday reported 7,000 new mortgage jobs in February-a 3% jump in the sector and a significant factor in an unexpectedly strong report on the nation's labor market.
The mortgage industry "is generating a lot of business so it is not surprising to see additions to the work force," said David Lereah, chief economist of the Mortgage Bankers Association of America. He noted that, with consumers refinancing loans to take advantage of lower rates, the industry is on a pace to originate $1 trillion of loans this year, matching the 1993 record.
But with interest rates ratcheting up last week, the jobs could disappear as quickly as they were created. The question is whether lenders are better prepared to pare their work forces than they were in 1994, when the end of a refinancing boom left many companies burdened with extra staff and devastating severance expenses.
"It takes a long time to unwind from that staffing once it is added on," said David A. Keeling, senior vice president of NationsBanc Mortgage and director of its TeleMortgage unit. "As quickly as things spike up they can fall off."
Lenders and economists said automation has enabled lenders to handle the increased volume more smoothly than in 1993.
Although originations are matching the 1993 pace, staffing is still well shy of the 275,000 the mortgage industry employed in the first quarter of 1994, Mr. Lereah said. Today similar volume is being handled by 259,000 full-time employees.
"Firms don't need to add as many people in peak periods because of increased productivity" said David Berson, chief economist at Fannie Mae.
What's more, bankers say many of the jobs are temporary posts, meaning that severance costs won't be nearly as high as they were in the last cycle. Mr. Keeling said NationsBanc Mortgage has opted for temporary workers and overtime for existing staff to meet the demand for refinancing.
But the end of a refinance boom might not be the only phenomenon that could cause job growth to slow. Some economists said consolidation in the mortgage banking industry and banking industry as a whole could also have a negative impact on future job growth.
First Union Corp. plans to eliminate more than 4,440 jobs as a result of its acquisition of CoreStates Financial Corp., and NationsBank Corp. said it would eliminate 6,000 jobs when it completes its acquisition of Florida's Barnett Banks Inc. in January.