Wells Fargo May Cut 3,800 Jobs in a Year

Many economists claim we are on the path on recovery, and the GDP will soon be high. The unemployment rate, however, is not dropping a bit. If it would have been recovery, most companies should have started hiring, at least the ones who were downsized.

But the daunting trend seems to continue. Wells Fargo is about to cut 3,800 jobs and close down 638 stores in the financial division; the company announced on Wednesday. In fact, if this happens, the company may close down its consumer finance division, which offered non-prime loans to homebuyers.

They will downsize around 2,800 employees in next couple of months, and the other 1,000 jobs would be cut within next 12 months.

The need for separate financial division was eliminated when the company merged with Wachovia in 2008. However, they aren’t doing too well since they have had their own division.

The President of Well Fargo Financial, David Kvamme, says ‘the economics of Wells Fargo Financial channel is no longer reliable’.

Restructuring will cost the company around $185 million. Around $137 million of the total cost will appear in the second quarter of 2010, for severance. Other charges will show up in the subsequent quarter.

Although 3,800 job cut wouldn’t increase the unemployment rate substantially. But we are not sure whether it’s only this company or it’s a beginning of another meltdown.