Wall Street giant Goldman Sachs began laying off as many as 3,200 people this week, a move that follows a dealmaking slump and softening business climate, according to a person familiar with the matter who spoke on the condition of anonymity because they were not authorized to speak about it publicly. The reductions are said to be among the company’s largest since the 2008 financial crisis.
The firm-wide cuts, totaling about 6.5 percent of Goldman’s workforce, also stem from a restructuring plan the investment bank announced in October and the reintroduction of a ritual year-end culling of underperformers that was suspended during the pandemic, the person said.
“We know this is a difficult time for people leaving the firm,” Tony Fratto, global head of communications at Goldman Sachs, said in a statement. “We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions.”
The investment banking sector saw a sharp retraction in fees last year after robust growth in 2020 and 2021, Barclays analyst Jason Goldberg said. But he also pointed out that Goldman Sachs is narrowing the focus of its consumer business as a part of the restructuring.
That reorganization signals a shift away from the mass market toward the bank’s existing customers, Goldberg said. “You learn things along the way,” he said. “And as they were building it out, some of the things were a little harder to do than once thought.”
The changes at Goldman reflect a larger industry repositioning as interest rates climb after decades of easy money policies, said Richard Bove, a financial strategist at Odeon Capital Group.
Investment banks have “been thriving on easy money at low cost rates,” he said. “They can’t have that anymore.”
The effect of rising rates was exacerbated by Goldman’s unsuccessful push into consumer banking, Bove said, and “Goldman is reacting violently.”
The investment banking sector slumped last year — for the first nine months of 2022, the top 10 companies saw fees decline 39 percent year-over-year, according to a report by Dealogic.
For its part, Goldman’s revenue fell 21 percent during the first nine months of 2022 compared with the same period a year earlier, and its stock price has dropped about 10 percent over the past year. The layoffs come as Goldman reassesses its costs, including two Gulfstream jets the firm purchased in 2019, the Financial Times reported.
The company will release fourth-quarter results on Tuesday.
Goldman’s cuts are the latest in a string that has eliminated thousands of white-collar jobs, particularly in the tech and media sectors. Last week, cloud-computing giant Salesforce announced that it could lay off as many as 8,000 workers. Amazon has said it will slash 18,00o jobs while Meta, Facebook’s parent, announced last fall that it will cut 11,000 positions.
On Wall Street, Goldman rival Morgan Stanley in December trimmed about 1,600 workers, about 2 percent of its workforce. This week, Wells Fargo said it would shrink its home lending business amid higher interest rates and regulatory pressure, according to CNBC.
Despite the large-scale layoffs, the jobs market has shown remarkable resilience in the face of other economic head winds, primarily high inflation. Data released last week by the Bureau of Labor Statistics showed that the U.S. economy added 223,000 jobs in December while the unemployment rate inched down to 3.5 percent — near record lows.
The conflicting signals reflect a fragmented job market, economists say. While large and high-profile companies undergo staff reductions, small- to medium-size employers are adding workers, The Washington Post reported. At the same time, the large layoffs and moderating job numbers may also signal a slowing labor market.
“It’s hard to talk about the labor market in a single breath,” Aaron Terrazas, chief economist at Glassdoor, told The Post last week. He also noted that risk-intensive sectors such as tech and finance have been shedding workers in recent months as employers reevaluate geopolitical, investment and the supply chain risks.
In an October investment call, Goldman chief executive David Solomon said the “global economy continues to face significant head winds.”
He referenced high inflation, the Federal Reserve’s raising of interest rates and geopolitical instability. “Everywhere I go, macro themes dominate,” he said.
Solomon also detailed the investment bank’s reorganization plans, calling it an “strategic evolution.” He said the company would integrate its consumer banking business and its wealth management division, as well as consolidate its fintech platforms and its investment banking and global markets business.