The lawsuit alleges that Wells Fargo systematically discriminated against minority loan applicants, leading to denials, delays, and less favorable loan terms. It references a Bloomberg report from March 10, 2022, which highlighted disparities in loan approvals between White Americans and minority groups, based on data Wells Fargo disclosed under the Home Mortgage Disclosure Act. Read … [Read more…]
Despite a drop from their peak levels, current mortgage rates stand at more than double the rates observed in 2021. Both buyers and sellers have been eagerly awaiting the Federal Reserve’s move to initiate interest rate reductions. However, Federal Reserve officials have consistently indicated that they are not in a hurry to act. Looking ahead, … [Read more…]
News that Capital One has struck a deal to buy Discover shook up the normally quiet Presidents Day banking holiday on Monday, teeing up the possibility of making Capital One the nation’s largest credit card issuer.
The Wall Street Journal reported the potential merger on Monday, followed by other outlets like Bloomberg and the New York Times. Capital One then released a statement confirming the planned acquisition.
Capital One Financial Corp., based in McLean, Virginia, is the nation’s ninth-largest bank by total assets, with 259 physical branch locations, 55 “Capital One Cafes” across the country and a major online banking operation. Discover Financial, based in Riverwoods, Illinois, is a mostly online bank with a single physical branch in Delaware. The all-stock deal is valued at $35.3 billion.
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Capital One has cards for earning rewards and cards for building credit. Some even do both.
Is Discover on board?
Michael Rhodes, CEO and president of Discover, touted the deal in Capital One’s press release: “The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company.”
What happens next?
Bank mergers must be approved by bank regulators and by shareholders of each company. If the deal goes through, Capital One estimates that it will close in late 2024 or early 2025.
What would it mean for customers?
During the approval process, little is expected to change as the companies continue to operate independently. Even if the deal is approved, though, current customers may see little effect.
“I think it’s not going to be a big change for credit card customers,” says David Robertson, editor and owner of the Nilson Report, a payment card industry trade journal. Discover cards, he says, are primarily cash-back cards, while Capital One offers a variety of rewards cards. A merger, Robinson says, “might allow for better rewards programs for both companies.”
While the Wall Street Journal reported that Capital One plans to keep the Discover name on at least some cards, details have not been confirmed by either company. Likewise, there is no detail yet on how banking customers will be affected.
Why merge?
Item no. 1: Discover’s payment network.
Transactions on Capital One cards are processed over the Visa and Mastercard payment networks. Discover, however, operates its own network, making it both a card issuer and a payment processor, similar to American Express. Robertson says acquiring a payment network and building direct relationships with more merchants is likely a driving factor in Capital One’s acquisition, which puts a 26.9% premium on Discover’s Feb. 16 closing stock price.
”From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology,” Richard Fairbank, founder and CEO of Capital One, said in the news release. “Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies.”
In addition, Robertson notes, there is not a great deal of overlap between the two banks’ customer bases. “One would assume that everyone that has a Discover Card also has a Visa or MasterCard,” he says. “Capital One may get access to that spending.”
Capital One is the fourth largest credit card issuer in the United States by loan volume; Discover is ranked sixth, according to Nilson Report data. Combined, they would nudge ahead of Chase to become the largest card issuer.
Sheer economy of scale is another factor. “Should [the merger] occur, Capital One would be the largest credit card issuer” as measured by outstanding debt, says Robertson.
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In a statement to Bloomberg, a spokesperson for City National Bank said the job cuts impacted “a targeted number of roles in some parts of the business.” “We regularly review our staffing plans and models to ensure they align with our strategic priorities and allow us to best serve our clients and communities,” the spokesperson … [Read more…]
U.S. new-home construction sank at the start of the year by the most since the onset of the pandemic, indicating the recovery in the housing market will be gradual as many buyers await a further decline in mortgage rates.
Residential starts decreased 14.8% last month to a 1.3 million annualized rate, after an upward revision to the prior month, government data showed Friday. Multifamily home construction plummeted by more than 35% after surging in the prior month, while single-family groundbreakings also slowed.
The headline figure — which was lower than all estimates in a Bloomberg survey of economists — was the slowest pace in five months.
“The monthly housing starts numbers are extremely noisy and prone to revisions, but the bigger picture is that single-family starts are trending higher, lagging the drop in mortgage rates towards the end of last year, while multi-family starts are trending lower, lagging the rollover in rent inflation,” Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, said in a note.
Building permits, a proxy for future construction, decreased to a 1.5 million rate. Permits for one-family homes edged higher after rising consistently throughout 2023, and multifamily authorizations fell 7.9%, the most since September.
The government’s report showed housing starts fell in all four of the nation’s regions, led by the Midwest and Northeast. The number of single-family homes completed plunged to the lowest level since May 2020.
The housing market’s recovery has struggled to maintain momentum as mortgage rates are still elevated near 7%. However, the nation’s builders have been gaining confidence in recent months on expectations that a further decline in borrowing costs will boost demand.
So far, builders have enjoyed limited competition from existing homes for sale. Homes available on the resale market are well below pre-pandemic levels as most owners remain reluctant to give up mortgages locked in at much cheaper rates.
At the same time, the inventory of new houses for sale remains elevated and suggests builders may be cautious about beginning new projects.
The National Association of Realtors will give a glimpse of the nation’s resale market Feb. 22, when it releases existing-home sales figures for January.
A separate report Friday showed prices paid to US producers rose in January by more than forecast, highlighting the sticky nature of inflation.
Banks increasing their acquisitions According to a Bloomberg report, the resurgence in acquisitions comes amid a rise in deposits, prompting banks to seek avenues to deploy this influx of capital. With traditional lending options constrained due to subdued loan demand and increased defaults resulting from two years of interest rate hikes, banks are turning to … [Read more…]
You’re probably seeing headlines almost daily screaming about layoffs, layoffs, layoffs. The ubiquity of those stories may make you worry about your own job stability.
There was a 10% increase in layoffs last year from the previous year — 19.8 million in 2023 compared with 17.6 million in 2022, according to an analysis of Bureau of Labor Statistics data.
But monthly layoffs throughout 2023 were actually slightly below pre-pandemic levels after a massive spike during the start of the pandemic, BLS data shows.
“I’m cautiously optimistic. I think there are some signs that we’ll still see robust demand for workers, be that through hiring or a relative absence of layoffs,” says Nick Bunker, economic research director for North America at the Indeed Hiring Lab, which tracks employment trends.
The current job market is incredibly resilient, and labor market indicators show that workers who are laid off aren’t likely to stay unemployed for long. The unemployment rate has stayed steady between 3.4% and 3.9% since December 2021. Unemployment claims, meanwhile, are largely in line with pre-pandemic claims, Department of Labor data shows. That goes for initial claims — by those unemployed for the first time — and for continued unemployment claims — those who have remained unemployed beyond an initial claim.
“I’m not particularly concerned,” says Elise Gould, an economist at the Economic Policy Institute, a Washington, D.C., think tank.
If economists aren’t panicked, it means you probably shouldn’t be either. Unless, of course, you’re in one of the sectors that’s seen an uptick.
Where are layoffs happening?
Gould and Bunker both say layoffs are largely siloed in the information sector, which includes both tech companies and media companies (hence all those layoff headlines). They say that shedding is likely to continue into 2024.
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In the scope of the entire labor market, tech and media remain the outliers when it comes to layoffs, Bunker says. “This time last year there were concerns about what’s happening to the tech or media industries or the broader information sector. And you could see from the data that layoffs did tick up, but that was not representative of what you saw in the rest of the market — it didn’t spread out.”
The transportation and warehousing industry has also seen a rise in layoffs since companies began downsizing after more rapid expansion during the pandemic. But employment in the sector is still well above pre-pandemic levels.
Among other sectors, a Feb. 1 report by Challenger, Gray and Christmas, an outplacement company, shows the financial industry has had the most job cuts so far in 2024 with a total of 23,238 in January. That’s the highest monthly layoffs among financial companies since September 2018.
Gould says layoffs like these aren’t necessarily signs of industrywide distress. Some reflect the churn that happens in the economy in any given month — jobs lost are offset by jobs added, she says. Throughout 2023, the amount of jobs added often exceeded expectations. That trend remained in January: The amount of jobs added was double what was projected.
“There’s a lot moving,” says Gould.
Some other areas with layoffs include the food industry, which announced 6,656 layoffs, the highest number since November 2012. The retail industry announced 5,364 cuts in January — a 4,776% increase from December. But take that big, scary percentage with a grain of salt: Layoffs happen every year in the retail industry after the holidays are over because companies hire a ton of temporary workers to meet demand.
Layoffs spiked among tech companies in 2023
Last year was not a good one for tech and neither was the one before that. Let’s face it — this year isn’t looking much better. In 2023, more than 1,190 tech companies laid off some 262,000 workers, according to layoffs.fyi, which tracks layoffs in the tech industry.
The biggest layoffs in 2023 were at big-name companies, including Amazon (27,410 workers) Meta, which owns Facebook and Instagram (21,000), Google (12,115) and Microsoft (11,158).
But so far in 2024, over 34,000 employees have been laid off among more than 140 tech companies, according to layoffs.fyi. Some of the big names this year include Snap, which owns SnapChat, Zoom, PayPal, Salesforce, Microsoft, eBay, TikTok, Wayfair, Google, Discord, Audible and Rent the Runway.
Job availability may also be dwindling. “Employers are still looking to hire at fairly robust rates across a variety of sectors,” says Bunker. “And that’s not the case for job titles related to the tech sector; they’re still pretty depressed there.”
The downsizing is likely due to some pullback from the hiring spree in the tech industry during the start of the pandemic, experts say. And layoffs in this sector, particularly for highly skilled tech professionals, don’t mean workers stay unemployed for long. They’re likely being gobbled up by other companies pretty quickly, Bunker and Gould say.
“For workers that have higher levels of education, oftentimes their unemployment rates are much lower,” Gould says. “Oftentimes they are able to get back on their feet. Obviously, that average story does not tell everybody’s experience, and there are people that will be worse off.”
Randi Weitzman, executive director of technology talent solutions at Robert Half, an international human resource consulting firm, says workers in tech positions have an in-demand skill set that every company needs.
“It’s not so much we’re seeing the demand in high tech, but in industries like health care, manufacturing, government, retail, hospitality and leisure. We also saw an uptick in professional services. But all of those industries need IT professionals to help them drive their companies,” Weitzman says.
Media layoffs soared as companies struggle to profit
For the media, 2023 was a proverbial bloodbath. The industry, as a whole, announced 20,324 cuts last year — the highest since 2020, according to a report by Challenger, Gray and Christmas, Inc. As a subset of media, news announced 2,681 cuts, which was more than layoffs in 2021 and 2022 combined, according to the report. Bloomberg estimated news media losses even higher — about 3,000.
“I think that is very much a structural story that’s more about long-term trends,” says Bunker.
“The issue for the media is internet.”
Media was once mostly funded by advertising — “they were sort of a one-stop shop for lots of advertisers,” Bunker says. But the advent of the internet changed advertising, and media paid the price. The other issue, Bunker says, is consumer expectations of the price they pay for information, that is, most people don’t want to pay for articles.
“It’s just more difficult for media to be profitable, and so you’ve had a pullback and a decline in employment in that sector of the economy,” Bunker says.
The past year saw cuts at Buzzfeed News (15%), Time Magazine (15%), NPR (10%), Business Insider (8%), Gannett (6%), Vox (11%), Conde Nast (5%), Vice Media (around 10%) and others. The Washington Post completed 240 buyouts last year to avoid laying off workers.
Since the start of 2024, even more news media organizations have announced staff reductions.
On Jan. 17, Conde Nast announced it was laying off staff and folding Pitchfork into the GQ umbrella. On Jan. 19, Sports Illustrated announced it would be giving its entire staff the boot within 90 days. On Jan. 23, the Los Angeles Times announced it was cutting 115 reporters — about 20% of its staff. Back in June, it slashed its workforce by 13%. The paper was reportedly losing somewhere between $30 million to $40 million a year.
Layoffs aren’t just hitting news outlets. Streaming services have disrupted traditional television. On Feb. 13, the TV network giant Paramount announced it was laying off 3% of its staff.
Mass layoffs across the labor market aren’t likely in 2024
Despite some worrisome trends in the information sector, widespread layoffs throughout the labor market still aren’t likely to happen anytime soon under current conditions, experts say.
“The outlook for layoffs is a function of what you think a broader economic outlook is, and we’ve gotten very strong economic growth data as of late,” says Bunker.
While the labor market is tight, and the industries with layoffs are generally contained, it doesn’t mean we won’t see more employment churn coming this year. CEOs aren’t feeling the need to hoard labor as much as they once did: A quarterly survey of CEO confidence released on Feb. 8 by The Conference Board, a think tank, shows 23% of CEOs expect to lay off workers in the next 12 months, up from 13% from the previous quarter.
Los Angeles Times: Photo by Mario Tama/Getty Images News via Getty Images
Google: Photo by Michael M. Santiago/Getty Images News via Getty Images
Microsoft: Photo by Tim Heitman/Getty Images News for BIG3 via Getty Images
TikTok: Photo by Dan Kitwood/Getty Images News via Getty Images
Paramount Studios: Photo by Mario Tama/Getty Images News via Getty Images