Banks resume hiring
Connecticut banks added 300 employees in the second quarter, a modest gain after job declines the previous two quarters and another sign that the local economy is rebounding.
New data from the Federal Deposit Insurance Corp. showed a similar trend in New York and New Jersey, though Massachusetts and Rhode Island banks continued to shed workers in the second quarter.
While Connecticut banks increased profits modestly to $94 million, larger commercial banks that provide much of the capital for large business loans lost $38 million during the quarter. Problem loans continued to creep up as a percentage of total loans and leases, from 2.8 percent in the first quarter to 3.5 percent in the second.
Still, that has not deterred banks from hiring, and the overall jobs picture in financial services has surprised analysts after predictions last fall of Armageddon in the sector. The Connecticut Department of Labor estimates that employment in the financial services industry was off 3,400 jobs between July and a year earlier, a relatively modest 2.8 percent drop compared with heavier attrition in other business and professional services industries.
“What has surprised us is the very modest loss in financial employment,” said Rae Rosen, senior vice president of the Federal Reserve Bank of New York, speaking at an economic conference last month sponsored by the Connecticut Business and Industry Association (CBIA). “We would have thought there would have been a much greater job loss and we have been continually surprised the job losses have not been sharper.”
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As of early August, small and mid-size banks reported continued decreases in overall demand including for refinancing transactions, and continued tightened credit according to an informal survey by the New York Fed released in mid-September.
Just more than half of 700 businesses surveyed in June said availability of capital was fair or poor in a poll published this month by the CBIA.
Credit availability is actually better than what business owners think, according to Drew Matus, an economist with the Banc of America Securities subsidiary of Bank of America Corp., who spoke this month at a CBIA conference in Rocky Hill.
“What actually is going on in credit (markets) has very little to do with banks,” Matus said. “Banks are still creating more credit than the economy would actually need ”¦ It”™s just that there are so many people ahead of you trying to get into the door that it seems like its coming from the banking side.”
Still, just 10 percent of businesses cited the tighter lending climate as their greatest challenge in the CBIA survey. More than half of business owners indicated they are most preoccupied with uncertainties in the national economy; 14 percent cited short-term business volatility.
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In the meantime, companies that need it have been turning to other sources for credit. Marie O”™Brien, president of the Connecticut Development Authority, said that loan applications have tripled to her agency this year, which she attributed squarely to the credit crisis.
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“We are a much more flexible lender,” O”™Brien said. “We are a much more patient lender. We are designed to be that way.”
Connecticut business owners have a less sanguine assessment of government programs, however, with more than three-quarters of those surveyed by CBIA rating them poor or fair at best.
The good news is that financial companies appear to be starting up in Fairfield County, providing new ”“ if old school ”“ access to debt and equity financing.
“It does appear that there are lots of satellite firms forming and hiring and they are absorbing some of those workers,” Rosen said. “The number and size of financial firms is changing ”¦ We are probably not going to (create) really difficult-to-understand financial products any more. We are going to make them plain vanilla so that everyone knows what they are getting.”