Several hundred employees of Goldman Sachs will be laid off by the end of next week, according to the company. There have also been mass layoffs at other firms in anticipation of a recession.
Return to pre-pandemic practices
Its layoffs mark a return to its annual practice, which was halted the last two years due to the pandemic. The Wall Street giant typically trims about 1% to 5% of its staff each year, and the 2022 cuts will likely be in the lower end of that range, said a source
Pre-layoffs the company’s headcount had grown to more than 47,000 globally, at the end of June. This was a 15 per cent increase from the similar period last year.
According to experts, up to five percent of the firm’s low-performing employees could be fired. This means a loss of a job for around 500 to 2,400 employees.
In July, during an earnings call, Chief Financial Officer Denis Coleman had warned that the company might slow hiring due to cost cutting as the economic outlook worsens.
Other banking majors on Wall Street such as Citigroup, JPMorgan Chase & Co, Wells Fargo & Co. have also terminated the contracts of their employees to downsize.
“Best use of resources”
“Given the challenging operating environment, we are closely re-examining all of our forward spending and investment plans to ensure the best use of our resources,” said Coleman.
“Specifically, we have made the decision to slow hiring velocity and reduce certain professional fees going forward, though these actions will take some time to be reflected in our results,” he further added.
Coleman said that the company recorded a 48 per cent slump in quarterly profit, forcing it to make tough decisions.
Factors affecting companies
As well as cutting costs due to an impending recession, several other factors are weighing on companies globally, such as uncertain macroeconomic conditions, the ongoing Russia-Ukraine war, and high inflation.
Aside from restarting the annual tradition of trimming down the employee count, Goldman Sachs is also expected to bring back its annual performance review policy for employees by year-end.