(Baltimore Business Journal) Baltimore used to be a regional powerhouse for banking and financial services, its roster of blue chip firms the envy of Interstate 95 neighbors Washington, D.C., and Philadelphia.
But just as rain slowly eats away the finish from a fine piece of outdoor sculpture, Baltimore’s financial services industry also has eroded over the past two decades. Out-of-town rivals from Charlotte, N.C., Pittsburgh and New York gobbled up Charm City’s banks and investment firms.
Maryland National yielded to NationsBank, now Bank of America. Mercantile, the oldest money in a town known for old money, couldn’t resist the charms of PNC. And Alex. Brown & Sons, sold out to Bankers Trust, which was in turn swallowed up by Deutsche Bank.
The musical chairs left Baltimore with a shrunken number of jobs in banking and financial services. Among those companies that remain, the banks are skittish about hiring since they do not know what financial reform will mean for them. Others, like Legg Mason and T. Rowe Price Group, have shed jobs to remain competitive amid the recession.
That is why Legg Mason’s decision to cut 250 positions in Greater Baltimore — about a third of its local work force — resonates so strongly. Many of those jobs in banking and financial services, once eliminated, never came back. Just ask former Provident Bankshares employees still struggling to find work a year after M&T Bank Corp. bought the company and slashed 521 jobs. Maryland’s unemployment rate is hovering at 7.7 percent.
But for those Legg Mason workers who will receive pink slips over 18 months starting July 1, a slowly improving economy, jobs coming to the area through the Base Realignment and Closure plan and Morgan Stanley’s upcoming Baltimore expansion could weigh in their favor.
Baltimore’s financial services sector lost more than one job in 10 in the past seven years, as mergers, and the recession that started in 2008, took their toll. The sector shed 9,665 jobs, falling to 70,147 positions in third quarter 2009, down from 79,812 in third quarter 2002, according to Maryland’s Department of Labor, Licensing and Regulation.
These are good-paying jobs, averaging $1,211 a week, or $62,972 a year.
“It’s not a good job market,” said Richard Clinch, director of economic development at the University of Baltimore’s Jacob France Institute. “I think these people are in for a short-term rough patch. But I think in the long term, Maryland will recover ahead of the rest of the nation.”
Clinch sees some hopeful signs. Many of the jobs Legg Mason plans to eliminate are in technology and operations, where workers could use their skills to find jobs outside the financial services industry. They could be a good fit for some of the thousands of jobs coming to Fort George G. Meade and Aberdeen Proving Ground as part of BRAC, Clinch said.
Sara Kline, an associate economist at Moody’s Economy.com, agrees. While Kline does not see Baltimore’s financial services industry rebounding any time soon, the market for professional and business services jobs in the area has held up better. Some laid-off workers could use their skills to find jobs in those areas, said Kline, who tracks Maryland’s economy.
The timing of the layoffs, which will start July 1 and occur over the next 18 months, also could benefit employees, said Darius Irani, director of applied economics at Towson University’s Regional Economic Studies Institute.
Irani said he expects Maryland’s jobless rate to fall to around 7.2 percent or 7.3 percent 12 months from now, and dip below 7 percent in a year and a half.
“The economy should be in full recovery by the time they receive their layoff notice,” Irani said.
But, uncertainty about the outcome of debates in Washington, D.C., over the shape of financial reform has slowed hiring in the banking industry, said Clifford Rossi, managing director of the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business. Banks are unclear at this point about what new requirements the legislation will impose on them and how they will be affected, said Rossi, a former banking executive.
Until banks see how the argument plays out, they are not going to take on substantial numbers of new workers, Rossi said. On top of that, many banks have seen their profits dwindle as customers have struggled to repay their mortgages and commercial real estate loans, Rossi said.
Morgan Stanley is one financial services company that is ramping up hiring here. In May, the New York financial services giant moved more than 500 Baltimore-area workers to a new building at Thames Street Wharf between Harbor East and Fells Point. The company plans to expand to 900 jobs in Baltimore by 2012, said Sandra Hernandez, a Morgan Stanley spokeswoman.
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