Goldman Sachs is preparing for a round of layoffs that could come as soon as next week, according to two people familiar with the plans, who spoke on condition of anonymity because they were not authorized to speak publicly.
The job cuts will affect employees across the company, the people said.
Goldman typically reviews headcount each year and fires employees based on the bank’s performance and needs. It had paused that program during the pandemic, which also coincided with a record time for deals when bankers complained of overwork. The program typically lays off 1 to 5 percent of workers; This round of layoffs is likely to be at the lower end of that range, said a person familiar with the matter.
Goldman CFO Denis Coleman told analysts in July that the bank “is likely to reintroduce our annual performance review of our employee base at the end of the year.”
The move comes as the Federal Reserve’s efforts to tame inflation by raising interest rates is cooling business deals and raising concerns that the US economy will slide into recession. The war in Ukraine has further unsettled the mix.
Goldman reported in July that its second-quarter profit fell nearly 50 percent year over year to just under $3 billion. Goldman’s investment banking revenue fell 41 percent from the same period in 2021. The company said its backlog was down, but didn’t say by how much. At the time, the bank said hiring would slow for the rest of the year.
The state of jobs in the United States
Economists have been surprised by recent strength in the jobs market as the Federal Reserve looks to orchestrate a slowdown and tame inflation.
According to data company Dealogic, business in the United States is about $1.2 trillion so far this year, compared to $2 trillion a year ago. According to EY, a consulting firm, about 95 percent fewer IPOs were carried out in the first half of the year than in the first half of the previous year. The number of deals fell by 73 percent.
“There’s no question the market has gotten more challenging,” Goldman chief executive David M. Solomon said on the July conference call.
“We have made the decision to slow down the rate of recruitment and lower certain professional fees going forward,” said Mr. Solomon. “However, we keep in mind that while we remain disciplined in our spending, it is not at the expense of our client business or our growth strategy.”
Mr. Solomon’s statements, which echoed similar warnings from Wall Street CEOs, were a far cry from the exuberance of last year. Then low interest rates and skyrocketing financial markets fueled a deal craze that required banks to hire new staff to help handle the stifling volume of transactions.
Still, it can be difficult for Wall Street executives to estimate the size required for layoffs. There are conflicting signs as to the state of the US economy, with some suggesting that it may already be in or about to enter a recession, while others believe there will be a slowdown but no contraction . And deals that may return as quickly as they fade have shown signs of optimism in recent times, like Porsche’s upcoming IPO. That makes bankers shy away from being understaffed if deals start roaring again.
But right now, Wall Street banks may just have too many dealmakers.
“They just don’t need as many bodies as they have,” said Chris Connors, vice president at Johnson Associates, a compensation consulting firm. “The production fell off a cliff.”
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