US: Goldman Sachs lays off thousands of employees as recession looms

0
  • American investment bank Goldman Sachs plans to lay off 3,200 employees this week
  • Goldman Sachs typically trims about one to five per cent of its employees each year and targets underperforming staff
  • The upcoming trim is expected to be deeper than usual in light of the uncertain economic outlook
  • Major U.S. banks, manufacturers and tech companies announced significant corporate layoffs in 2022, amid high inflation, and five rounds of interest rate hikes sparked fears of a recession

New data has revealed that American investment bank Goldman Sachs plans to lay off thousands of employees this week.

Multiple sources, including Capital FM, reported that Goldman Sachs would lay off 3,200 people, down from the expected 4,000 revealed in December 2022.

Quoting AFP, the news outlet noted that the American firm typically trims about one to five per cent of its employees each year and targets underperforming staff.

Why Goldman Sachs is firing employees

The upcoming trim is expected to be deeper than usual in light of the uncertain economic outlook. The layoffs will also be as a consequence of the firm’s growth in Goldman’s staffing in recent years.

The firm had an estimated 49,100 workers as of the end of October, which was a 30% increase from the end of 2019. The recent hike in employee numbers came amid hiring campaigns and acquisitions.

Commenting on the development, a source told Reuters that the layoffs are likely to affect most major divisions of the banks but should centre on Goldman Sachs’ investment banking division.

“Institutional banks have suffered a major slowdown in corporate dealmaking activity as a result of volatile global financial markets.”

The source added that hundreds of jobs are also likely to be reduced from Goldman Sachs’ loss-making consumer business after it scaled back plans for its direct-to-consumer unit Marcus.

Goldman Sachs’ announcement came after the bank posted a nearly 50% drop in profits over the 12 months ending in July to below $3 million.

“There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” said Goldman’s chief executive David Solomon on an earlier date. “For our leadership team, the focus is on preparing the firm to weather these headwinds.”

Goldman Sachs CEO David Solomon. Photo: BBC.

Forbes recently reported that major U.S. banks, manufacturers and tech companies announced significant corporate layoffs throughout 2022, as stubbornly high inflation and five rounds of interest rate hikes from the Federal Reserve spark fears the economy could be headed toward a recession. The publication said it had been tracking the biggest layoffs of 2022.

Layoffs in November hit 46,000 as a recession looms

Overall, Forbes said that over 46,000 people lost their jobs in two dozen significant corporate layoffs in November 2022, as employers fear recession could be around the corner.

These included Crypto exchange giant Kraken which said it was laying off 1,100 employees, nearly 30% of the company’s workforce. The company’s founder and CEO Jesse Powell said macroeconomic and geopolitical factors were to blame saying they had weighed on financial markets.

Still in November, Digital Currency Group also laid off 13% of its staff. In June, crypto exchange Crypto.com said it would fire 260 employees, although multiple sources including The Verge and CoinGeek said the number could be as high as 2,000. 

At the same time, Meta said it was laying off up to 11,000 employees. The layoffs at Meta followed an earlier move by Amazon that saw it fire some of its employees.Cisco also cut up to 4,100 employees, representing 5% of its staff, while Twitter CEO Elon Musk is speculated to be planning to fire about 3,750 employees, which is about 50% of its workforce.

Forbes added that nearly 100 large companies ranging from retail to banks and crypto exchanges have been laying off stuff since May 2022. The publication said the move by the employers has been fuelled by fears of rising inflation and four rounds of Federal Reserve interest rate hikes that could bring the economy into recession.

Economists, meanwhile, are predicting a recession could come as early as next year, with JPMorgan expecting a “mild recession” in 2023, even though inflation has reduced in recent months.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

Leave A Reply