New York-area financial services companies won't do a lot of hiring in 1997, say economists with the New York Fed, but they will add slightly more staff than last year, when employment in the sector scarcely grew.

"At best, regional financial employment will expand (slightly) in 1997 as large bank mergers subside," said Rae D. Rosen and James Orr, senior economists with the Federal Reserve Bank of New York.

New York State lost 5,400 banking jobs last year, the U.S. Department of Labor estimates, mostly because of mergers. Nationwide, 8,000 bank jobs were added, the department said.

But nonbank financial firms added employees in the New York area, the Fed economists said. Securities firms, real estate companies, and other nonbank financial institutions were hiring

Consolidation in financial services and corporate migration from New York and New Jersey have hurt local employment in the sector.

"It is not a new trend," said Goldman, Sachs & Co.'s Sally Pope Davis. Mergers are expected to depress bank employment less this year than last, she said.

Financial institutions are moving from the area, Ms. Rosen said, with many setting up shop in "midrange cities" such as Charlotte, N.C., Phoenix, and Seattle.

Overall employment in New York and New Jersey was stagnant last year, the Fed economists said. Nationwide employment was up 2%.

Joel L. Naroff, chief bank economist for First Union Corp., said employment is growing at banks, but not in all kinds of jobs. People who do traditional banking jobs are not secure, he said, but as large regional banks buy up mortgage companies and benefits consulting firms there is a net gain.

"There is downsizing, but it's in the traditional banking sector," he said. "The upsizing is in nontraditional banking."

Still, many financial services companies, including banks, are under intense pressure to achieve what analysts call "critical mass."

"This will be true of New York thrifts, and perhaps they will be in a consolidation mood over the next 12 to 18 months," said Frank Barkocy, a bank analyst with Josephthal, Lyon, Ross Inc.

George L. Engelke Jr., president and chief executive of Astoria Financial Corp., a $7.3 billion-asset thrift based in Lake Success, N.Y., said the loss of financial jobs has been a consistent result of the acquisition wave that's hit the area.

In New Jersey, employment in financial services grew almost 1% last year, the Fed economists said. Mergers and increased competition in the insurance industry were limiting factors.

But some banks are having to scramble to hold on to good loan officers, said Elizabeth A. Summers, a New Jersey-based analyst with Ryan, Beck & Co.

"There is still a growing demand for sales and marketing people to attract more customers," she noted.

Ms. Summers and other analysts said banks are trying to "do more with less," spending on technology while shaving off employees.

"We are seeing a continued focus on alternative delivery systems - ATMs, call centers, and even on-line banking - which expresses far less need for personnel," said Mr. Barkocy. "There has been a consistent long-term trend for personnel reduction."

But some observers remain optimistic, saying certain jobs cannot be replaced by bank technologies.

"We are among the believers," said Astoria Financial's Mr. Engelke. "There are many thousands of customers who enjoy the interaction with a banker and want to be personally served. There will be more opportunities to participate in the industry."

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