Goldman Sachs is set to trim its workforce significantly, with plans to lay off between 1,300 and 1,800 employees, according to reports from the Wall Street Journal. This latest round of job cuts, which will affect approximately 3% to 4% of the bank's global workforce, is part of the company's annual performance review process.
The layoffs, which commenced earlier this month, are expected to continue through the fall. This move reflects the bank's routine practice of adjusting its workforce based on performance evaluations and market conditions. "Our annual talent reviews are normal, standard, and customary, but otherwise unremarkable," Tony Fratto, a Goldman Sachs spokesperson, told the Journal.
Goldman Sachs has historically used its annual review to manage staffing levels, targeting reductions between 2% and 7% of its workforce depending on various factors, including the bank's financial outlook and prevailing market conditions. In January 2023, Goldman Sachs reduced its headcount by approximately 6%, followed by additional layoffs later in the year.
This year's layoffs come amidst a broader trend within the banking industry. Major banks, including Citigroup, have made substantial cuts in recent months. Citigroup, for example, eliminated around 2,000 jobs as part of a reorganization aimed at streamlining operations and enhancing profitability. Similarly, Goldman Sachs' decision to cut jobs aligns with its ongoing efforts to refocus on core financial activities and manage costs amid economic uncertainties.
The timing of Goldman Sachs' layoffs coincides with a period of cautious optimism for the bank. Despite a challenging economic environment, Goldman Sachs reported a 21% increase in investment banking revenue for the second quarter of 2024 compared to the same period last year. "From what we're seeing, we are in the early innings of a capital markets and M&A recovery," said CEO David Solomon during a recent earnings call.
Solomon's comments reflect the bank's expectation of a rebound in the investment and merger markets. Goldman Sachs' shares have performed well, gaining nearly 32% this year and outpacing broader market indices. The positive performance underscores the bank's belief in a forthcoming recovery, despite ongoing economic challenges and uncertainties related to the upcoming U.S. election.
The decision to implement layoffs also ties into Goldman Sachs' strategic shift towards higher-margin investment and banking activities. The bank's recent divestiture of its GreenSky platform and its pivot away from retail banking reflect a broader strategy to concentrate on more lucrative market-focused operations.
Goldman Sachs' annual performance reviews, which are a customary part of its operational strategy, are designed to address underperformance and adjust staffing levels accordingly. While the current round of layoffs is part of this standard process, it has drawn attention due to the scale of the cuts and the broader economic context.
The bank's move also comes at a time when economists are adjusting their forecasts for a potential recession. In an update earlier this month, Goldman Sachs reduced the probability of an economic downturn from 25% to 20%, citing recent data on retail sales and unemployment claims. The next jobs report, scheduled for release on September 6, will be closely watched for further indications of economic stability.
