KBRA Financial Intelligence

Bank Hiring Reverses Course Despite Loan Growth Rebound

Cracks in Hiring Activity Hit Commercial Banks

After experiencing its first quarter-over-quarter (QoQ) gain since 2023 in the prior quarter, the net change in total commercial bank head count—as reported in Federal Financial Institutions Examination Council (FFIEC) call reports—returned to negative territory in 2Q 2025, declining by 0.3%. This marked the largest drop in a year, suggesting U.S. banks remain hesitant to resume consistent hiring. Since peaking in 1Q 2023, commercial bank head count has fallen by approximately 74,650 full-time employees. The slowdown in hiring in the commercial banking business has coincided with broader labor market softness, as recent U.S. payroll data showed the weakest three-month period for job growth in the past five years through July.

Credit Unions Continue Multiyear Staff Expansion

While banks appear to have contributed to the broader jobs slowdown, credit unions have shown greater resilience. National Credit Union Administration (NCUA) call report data indicated that U.S. credit union head count increased 0.5%, marking the fourth increase in the past five quarters and pushing full-time credit union employment to an all-time high of more than 348,000. Although this represents less than one-fifth of the two million full-time employees at commercial banks, credit union staffing has expanded 11.7% over the past four years, compared with virtually no net growth at banks over the same period.

KBRA Financial Intelligence (KFI) has previously highlighted this ongoing divergence, noting that it coincided with a period of rapid asset growth among credit unions relative to their commercial bank counterparts. A key factor potentially driving the expansion of credit union lending and hiring is the rate advantages offered by these institutions, particularly as the Fed aggressively tightened monetary policy in 2022-23. At one point in 2022, loan growth among credit unions was expanding at double the pace of commercial banks. While credit unions generally offer fewer products compared to commercial banks, they typically pay higher rates to depositors and offer lower rates to borrowers—a particularly attractive proposition when rates surge and consumers grow more sensitive to financing costs.

Softening Labor Market Implications for Fed and Rates

The drag from rising rates on commercial bank lending has eased in recent quarters, with loan growth beginning to rebound. Bank lending increased 2.1% QoQ in 2Q 2025, marking the fastest quarterly expansion in three years. Bank lending expanded 4% year-over-year (YoY), surpassing credit union loan growth for the first time since 2020.

Fed cuts totaling 100 basis points (bps) in 2024 helped ease pressure on bank lending margins by narrowing a historically deep yield curve inversion. That said, the yields on both the 10-year and 30-year U.S. Treasury bonds exceed their 52-week moving averages (MA) in the latest data. Buoyancy in long-term rates may suggest enduring confidence in U.S. economic growth, raising the prospect of a long-awaited yield curve steepening once the Fed resumes cutting rates. Alternatively, it could reflect concerns that persistent inflationary pressures may constrain the Fed’s ability to deliver further near-term easing.

Multiple top Fed policymakers have suggested easing should resume sooner than later, pointing to concerns in the labor market. In a statement explaining his dissent from the Federal Open Market Committee’s (FOMC) choice to hold rates steady at its most recent meeting, Fed Governor Christopher Waller cautioned that private sector payroll growth is “near stall speed,” with downside risks to the labor market increasing. Fed Vice Chair for Supervision Michelle Bowman, who also dissented, stated earlier this month that she sees three rate cuts as appropriate by year end—a trajectory that would require cuts at each remaining FOMC meeting for 2025. Bowman’s target is broadly in line with the most recent median expectation among all FOMC participants, outlined in projection materials from the committee’s June gathering, although it remains uncertain whether that guidance will hold when renewed projections are released in September. KFI will continue to follow developments in the lead up to the FOMC’s September meeting, including the White House’s reshuffling of the Fed’s Board of Governors.