Despite the fact that that the national unemployment rate continues to rise as fear of an economic recession increase, Massachusetts seems to be relatively unaffected at this time. The state’s jobless rate remained at 4.4 percent in March and 2,9000 jobs in Boston
and elsewhere were added. A report recently released by the Federal Reserve found that Boston is one of the few cities in the country that has yet to suffer from the wide spread turmoil caused by the housing market crisis.
Nevertheless, there will soon a small decrease in the number of jobs in Boston. First Marblehead Corp.
recently announced that it will soon be laying off over half its workforce. The company says that it will do away with 500 jobs in Boston and Medford in hopes of saving $200 million in annual expenses. The layoffs have been caused at least in part to by the instable circumstances in the student loan business at this time. According to a company spokesperson, the positions being done away with will include upper-level executives.
In March of this year, the company’s partner in business, The Education Resources Institute (TERI)
, which guaranteed the student loans issued by First Marblehead, filed for bankruptcy. This had made it harder for First Marblehead to sell these securities. First Marblehead took another economic hit in April when its other partner, Bank of America, announced that it would be leaving the private student loan business.
According to TERI chief executive Willis J. Hulings, the loss of Boston jobs
was not unforeseen. Hulings says that “A significant workforce reduction should not have been unexpected given the significant changes in the capital markets.” He acknowledged that his company’s bankruptcy filing mostly likely contributed to First Marblehead’s financial problems.
First Marblehead’s chief executive Jack Kopnisky
said that “This has been an extraordinarily challenging business environment for our company.” He went on to say that “the market and credit conditions have not improved, and TERI’s bankruptcy filing has forced our business situation to change quickly.”
Kopnisky believes that these layoffs could help his company get back on the right part. In a separate statement he said that there is “a strong demand for private student loans and limited supply as some lenders leave the market.” He also said that First Marblehead believes that they have the depth of experience needed to make it through the market’s time of struggle. He finished saying that the changes the company is currently making will allow it to evolve “into a diversified education finance products and services company.”
As of February, First Marblehead had 920 employees. After the job cuts in Boston and Medford were announced shares in the company rose 18 cents to $4.04.
Labels: Boston Jobs