It was a long hot summer for some employees at Wachovia, Bank of America and First Union. But it wasn't just the sweltering summer temperatures that made people sweat.

Over the span of two months, the three banks announced that they would eliminate up to 17,000 jobs as part of cost-saving and restructuring changes. The dismissals, which are still going on, spread across the nation, but the economic impact will be greatest on North Carolina, where all three banks are headquartered. In Winston-Salem, for example, where the $72 billion-asset Wachovia Corp. is based, the city's workforce declined by 1.3% between April and September, according to the U.S. Bureau of Labor Statistics. And the city of Charlotte's very low unemployment rate nearly doubled to 4.3% in recent months.

It's impossible to say precisely what impact the job cuts have had on the state's roaring economy, although most sources see only minor repercussions so far. Outplacement experts feel that with North Carolina's overall job market still tight--the unemployment rate statewide is well below the national average--jobless bankers will have little trouble finding new work.

Still, the moves have had ripple effects. Many North Carolinians now think twice before buying an expensive house or car, and charities have reduced their fundraising goals. With the holiday shopping season in full swing, retailers may only begin feeling the effects this month.

Pricy Homes In Charlotte Suffer

Description   Original
Asking Price  
Difference   Percent
4 bdrm,
3.5 baths
$260k $255k $4,900 1.90%
5 bdrm,
3.5 baths
$339k $334k $5,000 1.50%
4 bdrm,
3.5 baths
$575k $540k $35,000 6.50%
6 bdrm,
5.5 baths
$1,299k $1,225k  $75,000 6.00%

Because most of the job cuts were among higher-level officers, the impact has been particularly harsh on businesses that cater to the state's wealthier citizens. Take residential real estate, where Elaine and Ray Eschert, Realtors at RE/MAX Metro Realty in Charlotte, witnessed first-hand how the banks' cuts are trickling down. High-priced homes ($350,000 and up) are sitting longer, and in some cases, sellers have reduced their asking price to lure more buyers. One four-bedroom, three-and-a-half-bathroom house in Ballantyne, a fancy Charlotte development, recently sat on the market more than three months. The home originally hit the market at around $450,000, but the sellers had to mark it down nearly $50,000 to get anyone interested in buying.Certainly, the banks' job cuts have not caused the North Carolina economy to tank. It remains strong. But until this summer, when the firings began, the state had been more than booming. In the Charlotte area, for example, the unemployment rate was only 2.3% last April, but by September, it had climbed to 4.3%, according to the Bureau of Labor Statistics. The number of people looking for work in Charlotte rose to 34,000, from a scant 18,200 in April. For the state as a whole, the unemployment rate rose to 3.6% in September, from 3% in April, reflecting an increase of 22,000 jobless people statewide during the period. The national average unemployment rate in September was 4.1%.

Many people have said that the job cuts, as Ray Eschert puts it, will be "just a speed bump," in North Carolina's economic cycle. And how long it takes these unemployed bankers to find a new job, or even another line of work, could determine the length and degree to which the cycle is affected.

Banking has been the centerpiece of North Carolina's economy for years, and some economists attribute the softening to the string of bank dismissals. But not all in North Carolina are convinced that the bank cutbacks have had a negative impact on economic activity in the state.

Tony Crumbley, vice president of research at the Charlotte Chamber of Commerce, plays down the importance of the bank cutbacks, saying that the underlying strength of the economy has mitigated their effects. North Carolina's tight job market will enable dismissed bank employees to find new jobs relatively quickly, he argues.

"The cutbacks at First Union, Wachovia and Bank of America in this community and across the state have not been felt," Crumbley says. "We are running a very low unemployment rate in this area and the state. And that's not to say that the individuals that have been laid off will not have some problems, but by and large it has not been seen as an economic problem for us."

Those are a lot of individuals. At Wachovia, 1,800 employees will have lost their jobs by the end of the year, 550 of them in North Carolina. Winston-Salem has already lost more than 360 Wachovia jobs, about 7% of the positions the bank had there. In contrast, Wachovia cut only 100 jobs were in its Atlanta office.

Bank of America Corp. said this summer that it will be cutting 9,000 to 10,000 jobs, or 6.7% percent of its staff. The job eliminations began with upper-level employees last August, and they'll continue until August 2001. A spokesperson says that the bank could not offer a regional breakdown of how many employees in North Carolina would be fired.

First Union Corp. said in July that it would cut up to 5,300 employees, 7% of its workforce, but did not give a timetable. The company declined to tell U.S. Banker how many North Carolina employees would be dismissed by the end of the year.

So far, residential real estate at the upper end of the market has felt the brunt. Local realtors have said that after years in a seller's market, several of North Carolina's major cities are gradually becoming buyers' markets. That's especially true for high-priced homes, real estate agents say.

The Escherts of RE/MAX Metro Realty moved from New York to Charlotte in 1978. At the time, they said that many New York bankers were making the same move, drawn to the blossoming city by property values and Charlotte's go-go banking climate. "I had one banker say to me, 'I've got a huge house, a Mercedes Benz--I'm rich,'" Ray Eschert says of a banker who moved to Charlotte.

Now, more than 20 years later, bank layoffs, combined with overbuilding and higher interest rates, have left high-ticket houses sitting on the market longer than usual, Eschert says. Many sellers who have had homes languishing for 30 days or more have lowered their asking prices. "Overbuilding in certain areas has left homes sitting on the market longer, and bank cutbacks have definitely had an impact," he says.

Betty Gerace, a residential real estate agent in Greensboro, finds that the bank job cuts have affected the sale of high-priced homes in her area, close to Winston-Salem, as well. "When you get those types of headlines in the newspapers, it definitely dampens the market," says Gerace. "It's not too different than the stock market in that respect."

One North Carolina Realtor, who asked not to be named, says that "in real estate, you always hope to do as well as last year--and then some." Such has not been the case of late. This Realtor says that from January through August 2000, home sales were either equal to or better than in 1999. Then came September, the month after Wachovia announced its layoffs: high-end home sales were reportedly 5% below September 1999.

People in North Carolina seem, at the very least, to be "thinking twice about making a big purchase," says Frank Warren, president of Karnes Research, a commercial real estate market research firm in Charlotte and Raleigh. "You might not want to buy that Lexus."

Have people really stopped buying? Luxury car dealerships contacted in Charlotte and Winston-Salem refused to comment on sales activity in 2000.

Bank cutbacks have hit not-for-profits, too. Like banking institutions everywhere, North Carolina banks have historically been active in their communities. BofA, First Union and Wachovia have long been involved in local charities, especially the United Way of the Central Carolinas, where donations from the banking community typically account for one-third of all contributions.

But in the past year, United Way officials reduced their annual campaign fundraising goal to a projected 8% growth over 1999, compared with a 10% increase the year before. As it turned out, more aggressive targeting of other industries, such as technology, boosted United Way donations in the Carolinas this year to some 12% over 1999.

Although the final numbers for 2000 hadn't been tallied as U.S. Banker went to press, James van der Klok, senior vice president at the United Way chapter, says that he expects banks' share of contributions to be lower than usual. Van der Klok says that the United Way reduced its annual fundraising growth target because of the "uncertain times" in the local banking community, namely the layoffs at Bank of America and rumors that First Union might be purchased by Wells Fargo & Co.

The organization lost a member of its board of directors, as one Bank of America employee resigned from the United Way after he lost his job. He left the board to "devote more time to his job search," van der Klok says.

Cheryl Roberts, director of economic development and planning at the University of North Carolina-Charlotte Urban Institute, also has watched such a shift take place since layoffs began in July. The Urban Institute is an outreach unit of UNC-Charlotte that participates in regional activities and programs, in addition to local projects for individual governments, businesses and organizations. Organizations like the United Way and the Affordable Housing Committee in Charlotte are "having a difficult time keeping bank representatives," according to Roberts. The banks "have the funding, and the organizations need the banks' support," she says. "They need the funding."

Despite the shake-ups, many observers of North Carolina banking say that that the former Bank of America, Wachovia and First Union employees may not have long before they are snatched up, possibly by a former competitor.

"This is one of the strongest bank economies in the country," said D. Anthony Plath, associate professor in the business and finance law department at UNC-Charlotte. "If you had to be laid off, this is the time you'd want to get laid off."

Both Plath and Crumbley of the Charlotte Chamber of Commerce say they know several bankers who had lost their jobs at the big banks in the recent round of cuts but have already found work.

But not necessarily in banking. Looking back at the experience of bankers who lost their jobs in previous rounds of mass firings, sources suggest that unemployed bankers harness any business and marketing skills and cross over to another field. Although North Carolina is known as a strong banking community, "it's not a one-horse town anymore," says Plath. He cites a former banker who turned to racecar driving and became a NASCAR Winston Cup business manager, using his money-management skills acquired as a banker.

"We joke around here that everybody at one point in their careers worked at First Union," Plath says.

But it may be too soon to judge just how long it will take many of the affected employees to find new work. Each of the banks is giving former employees severance packages, mostly based on their years of service. At Wachovia, recently dismissed employees receive one month's pay for every two years of service. Senior officers get 12 months' pay.

But the people who might be hurt the most as a result of these cuts are "traditional back-office" employees between the ages of 45 and 60 who are not "technologically oriented" and do not possess a specific skill set, sources say. According to Plath, many UNC-Charlotte business and finance students have been receiving "four or five offers each" from regional banks before they graduate. The cost of labor for a 22- to 30-year-old is much less than the lifelong banker who was earning a six-figure salary, and younger employees may be keener on plunging into banks' technological initiatives.

Paul O'Donnell, regional senior vice president of Lee Hecht Harrison, a global career services firm that has been working with both Wachovia and First Union, does not believe that senior-level officers will have much difficulty finding new work, depending on how flexible they are. "It's pretty rare to find an employee who's good at only one thing," O'Donnell says of the belief that older bankers may not be suited for a job search in a "new economy."

He says that exposure over the course of 20 to 30 years to different areas of banking might help a banker acquire "unused skills," talents the banker may not know that he or she has learned. One of his clients was a former senior banker who cultivated his unused skills to become the chief financial officer of a not-for-profit organization.

Senior vice presidents at $100,000-plus are "moving quickly," O'Donnell adds. And senior executives with more than 20 years experience, if they want to avoid relocating, have the options of "taking a haircut" on salary or switching industries to trim time off their job search.

The question remains, with so many on the market at once, how long will that take?

And will bank cutbacks similarly create a speed bump for the economy in places like Cleveland, Milwaukee and New York, where bank restructurings and mergers are likely to throw thousands more bankers out of work?

It looks like North Carolina's steamy summer could turn into one cold winter.

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