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American Express unit to shed up to 1,000 jobs
By Andrew Haeg, Minnesota Public Radio
July 18, 2001
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Minneapolis-based American Express Financial Advisors has announced it will lay off up to 1,000 workers in Minneapolis. The move is part of a larger workforce reduction at the company's parent, American Express. Economists say it's a sign that the economic slowdown is spreading from manufacturing to financial services.

AMERICAN EXPRESS FINANCIAL ADVISORS deals in all realms of financial planning, from mutual funds to insurance. Until earlier this year, revenues at the Minneapolis-based division of American Express had grown by 15 to 18 percent a year. Last year the company built a new headquarters in downtown Minneapolis, and added some 900 employees to the 7000 thousand it already employed.

But as the stock market started dropping last year, and the economy slowed, the fees customers pay financial planners dropped with the value of their portfolios.

"We are going to continue to evaluate our staffing based on what the economy and what the markets do. We know already that we will have some areas where we will add jobs. But, the economy and markets right now are extremely turbulent. And we need to adjust our staffing accordingly," Tom Joyce, a spokesman for the company said.

The job cuts in Minneapolis are about a fifth of a larger workforce reduction announced by New York-based American Express, which owns the Financial Advisors division.

The cuts came as American Express said its second-quarter profits dropped 76 percent from a year ago, in large part because of decisions made in the Twin Cities. American Express announced a surprising $826 million write down for bad investments in junk bonds - known more benignly as high-yield investments - managed exclusively out of the company's downtown Minneapolis office.

"The setback in American Express is really not unique," said Wells Fargo Chief Economist Dr. Sung Won Sohn, who says companies across the financial industry, including his own, Merrill Lynch and Morgan Stanley Dean Witter have seen profits decline along with the markets. "Number one: the transaction value is declining or certainly not going up. And number two: fee income, which is based on the outstanding value of the stocks managed by American Express, also is not going up, and, in fact, could be going down."

Still, Sohn remains guardedly optimistic that the worst of the downturn is over. He says the American Express job cuts may be one of the last pieces of bad news before the economy rebounds later this year.

His view found support from Federal Reserve Chairman Alan Greenspan, who told Congress that the economy may pick up if housing prices and consumer confidence continue to grow.

Other analysts say financial firms are feeling the effects of a dropoff in stock trading and other investment activity that began more than a year ago.

"The down equity markets are taking their toll, both in terms of the value of equity assets on which they charge fees as well as new product sales," said Maitland Lammert, an analyst for Edward Jones in St. Louis.

She says the extent of American Express's problems surprised her. The company also announced a charge of up to $370 million in connection with the job cuts plus a separate restructuring charge of $826 million. Lammert said she expects this to be the last of the company's really bad news.

American Express Financial Advisors has already told 100 employees they'll lose their jobs. The company will make the remaining 900 or so cuts over the next 15 months.