Goldman Sachs has begun culling workers, and will continue the ongoing job cuts through fall as part of its annual review process, according to the Wall Street Journal. The investment bank’s “strategic resource assessment” is expected to affect around 3% to 4% of the bank’s approximate 45,000 employees, amounting to roughly 1,300 to 1,800 positions, the report stated.
“Our annual talent reviews are normal, standard and customary, but otherwise unremarkable,” Goldman Sachs spokesperson Tony Fratto told the Wall Street Journal.
Fratto mentioned that the bank’s global headcount is expected to remain higher this year than it was in 2023.
Goldman Sachs’ annual performance review process typically results in workforce reductions ranging from 2% to 7%. The practice of terminating “low performers” was temporarily suspended at the bank during the Covid-19 pandemic, but resumed in 2022.
Last year, Goldman Sachs reportedly trimmed between 1% and 5% of its staff through this process. The extent of these cuts varies based on performance evaluations, prevailing market conditions and the bank’s financial outlook.
Other large investment banks have also conducted layoffs in recent months. In response to an uncertain economic climate, major financial institutions in the United States implemented significant workforce reductions during the first quarter of 2024. Collectively, these banks cut over 5,000 jobs as part of belt-tightening measures, PYMNTS reported. Citigroup led the downsizing efforts, eliminating approximately 2,000 positions as it underwent a restructuring initiative aimed at enhancing profitability and streamlining its management structure.
Job cuts across the investment banking sector are generally attributed to a combination of factors, including economic uncertainty, reduced deal-making activity and efforts to streamline operations and reduce costs.
While these layoffs are significant, they are also part of the cyclical nature of the finance industry, where firms regularly adjust their workforce in response to market conditions and performance metrics.
Economic Headwinds
Goldman Sachs’ recent cullings are driven by several key economic challenges that the bank is currently facing, the report stated. The macroeconomic landscape has become increasingly difficult, characterized by high interest rates and overall economic uncertainty. This has led to a significant slowdown in deal-making and investment banking activities, with declines in mergers and acquisitions, initial public offerings and other transactions that are crucial for Goldman’s revenue generation. Additionally, market volatility has negatively impacted the bank’s trading business, further complicating its financial outlook.
Goldman Sachs has also encountered struggles in its consumer banking segment, particularly with its Marcus brand, which has faced difficulties and wavering investor confidence.
Furthermore, like many other banks, Goldman expanded its workforce during the pandemic boom and is now adjusting staffing levels as business conditions normalize. Increased competition in the investment banking sector also necessitates operational optimization.
While there are some signs of recovery, such as improved investment banking revenue in Q2 2024, the overall economic environment remains challenging, prompting these strategic workforce reductions.
Favorable Investor Reaction To The Layoffs
Goldman Sachs’ stock closed with a 0.6% gain on Friday following reports of planned layoffs, capping off a remarkable 32% surge in 2024. This performance has outpaced both the broader markets and an index of large-cap bank competitors.
The positive investor reaction suggests that the cost-cutting measures are being viewed favorably, as the stock has finally begun to generate returns for shareholders after remaining stagnant from 2018 to early 2024.
Being Labeled A ‘Low Performer’
Being laid off can be a deeply distressing experience, as it brings not only financial insecurity but also emotional stress and anxiety to affected workers and their families. The situation is exacerbated by the stigma associated with being labeled a “low performer,” a term that implies failing to meet expectations and being ranked among the lower echelons of the workforce.
This negative perception can significantly hinder these individuals’ efforts to find new employment, as they re-enter the job market burdened with a metaphorical scarlet letter that marks them as undesirable candidates.
Source: Forbes
