Mortgage industry’s pain continues - Countrywide cutting 12,000 jobs
Posted on September 8, 2007
Filed Under Economy, Subprime Mortgage |
That’s the report alright. But, we’re not surprised, are we? Sure, it is unfortunate anytime there are mass layoffs and industry downturns. The Lord knows I’ve seen my fair share as a consultant in the technology sector. But things are not as first meets the eye.
12,000 jobs represents 20% of Countrywide Mortgage’s workforce; that is substantial. But keeping things in perspective, those were jobs that were added to and above their previously-stable population. They were added to take advantage of the era’s spending and lending mania. That market phenomenon is over. So, the market self-adjusts and the headcount adjusts to find its equilibrium with the company’s needs.
Reporting on jobs and layoffs is tricky business. There are so many dynamics that are impossible to get a handle on. For example, what you don’t hear is the fact that usually while companies are laying off, they are a the same time having job fairs. I saw this first hand when I worked at Countrywide myself, as well as at EMC Mortgage (the same thing happened at Verizon and other large companies where I have served).
Generally speaking, a lot of the reporting of workforce adjustments pertains to facts not stated, typically driven by accounting and corporate financial objectives.
For example, let’s say a mega mortgage company knows it needs to trim back its payroll soon to remain profitable (or less lossful). Then the question becomes a matter of “when”. Is it better to do it now when there are reported market conditions that make it easier for workers and the public to understand the situation? (probably yes).
Many times employees are let go while at the same time the company is hiring contractors. As an aside, in information technology departments, this is particularly advantagious on the books because a company can easily classify the cash expenditures as “capitalization” for creating new software as opposed to “operating expenses” for payroll for the same headcount doing the same thing.
Anyway, back to my purpose in telling you that this news does not mean the end of Countrywide or the mortgage industry or of subprime mortgages. It is just the cyclical adjustment at the end of a good run. There will be more companies doing layoffs before it is over. Then before too long there will be new companies starting up and more hirings. Some of the displaced workers will take there skills into other fields - maybe banking or real estate. It is interesting to note that Countrywide had 18,000 employees at the end of 2001, and had increased that count to 55,000 by the end of 2006.
Remember, the media is all about reporting facts, but not necessarily the whole truth. The truth is that there are market cycles in every industry, and the mortgage industry is the one with the cycle and the news attention at this time.
Regards,
Stephen Dunbar
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