Morgan Stanley Officially Plans to Lay Off 1,600 Employees
[Asia Economy Reporter Yujin Cho] The major U.S. investment bank (IB) Goldman Sachs has confirmed plans to lay off 3,200 employees this week, initiating the largest workforce reduction in its history. Due to aggressive interest rate hikes and an economic recession slowing down overall financial investment activities, layoffs are expected to continue on Wall Street this year following last year.
On the 8th (local time), Bloomberg News, citing sources familiar with the matter, reported that Goldman Sachs is expected to begin the layoff process this week, with the number of layoffs not exceeding 3,200. More than one-third of the layoffs are expected to come from the investment banking division, which has experienced sluggish trading since last year.
Goldman Sachs’ total workforce has increased by more than 34% since 2018, reaching around 49,100 employees (as of the end of September last year), and this layoff corresponds to about 6.5% of the total workforce.
Although the scale of layoffs is smaller than initially expected (4,000 employees), it is the largest in the company’s history. Goldman Sachs previously laid off about 3,000 employees, approximately 10% of its workforce, immediately after the 2008 Lehman Brothers bankruptcy crisis.
David Solomon, CEO, had earlier announced in a year-end message to employees on the 27th of last month that additional layoffs were being prepared and that an announcement would be made within weeks.
He stated, "There are many factors affecting the business environment, including monetary tightening policies that have slowed economic activity," and added, "Management is focused on preparing for headwinds." He also emphasized the need to manage human resources carefully and wisely, expecting layoffs to occur in the first half of next month.
Previously, Goldman Sachs conducted its first workforce restructuring on Wall Street by laying off hundreds of employees in September last year. This cost-cutting measure was taken as high interest rates dried up cash in the market and dealt a direct blow to the investment banking division’s performance. Bloomberg analyzed that the M&A market, which enjoyed a record boom last year, has fallen into a recession, and the sharp decline in corporate fundraising fee income is spreading damage across Wall Street.
The U.S. Federal Reserve (Fed) implemented four consecutive 'giant steps' of 0.75 percentage point rate hikes, followed by a 'big step' (0.50 percentage point increase) at the end of last year, narrowing the pace, but the upper bound of U.S. interest rates jumped to 4.5%, the highest level since 2008.
Fed Chair Jerome Powell has signaled a slowdown in the pace of tightening but formalized a message to maintain higher rates for a longer period, leading to expectations of continued rate hikes this year. In response, Wall Street is actively downsizing in preparation for a prolonged capital market downturn caused by aggressive tightening and economic slowdown. Following small-scale layoffs by Citigroup and Barclays, Morgan Stanley announced earlier this month plans to lay off 1,600 employees, equivalent to 2% of its total workforce.
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