(Daily Mail) - Goldman Sachs CEO David Solomon has warned employees to brace for significant layoffs in the coming weeks, as the investment banking giant battens down the hatches for an economic downturn.
- Solomon issued the warning in his traditional year-end memo to employees
- He said a 'headcount reduction will take place in the first half of January'
- It follows reports the investment banking giant plans to cut about 4,000 jobs
- Layoffs affecting white-collar workers have been rising in recent months
'We are conducting a careful review and while discussions are still ongoing, we anticipate our headcount reduction will take place in the first half of January,' Solomon said in his traditional year-end message to staff, according to Bloomberg.
'There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity. For our leadership team, the focus is on preparing the firm to weather these headwinds,' he added.
It follows reports earlier this month that Goldman Sachs plans to lay off 4,000 'low performing' staffers, or about 8 percent of its workforce, to cut costs amid slumping revenue and profits.
Solomon warned in his message: 'We need to proceed with caution and manage our resources wisely.'
As much as 8 percent of the bank's workforce could be canned after the firm asked managers to draw up a list of candidates, sources told Semafor earlier in December.
The insiders said the layoffs will impact every division in the bank and will occur around January, the same time bonuses are usually distributed.
The layoffs would see the company trim its 49,1000 workforce for the first time since 2019, as its usual two to five percent annual culling was halted during the pandemic.
It follows a tumultuous year for the investment bank, which has seen its stock price drop by more than 15 percent since December 2021.
Morgan Stanley and Citigroup have also undertaken recent layoffs, as banking giants return to the annual culls of 'underperformers' that were common prior to the pandemic.
Most investment banks slash the bottom 1 to 5 percent of employees just before bonus time, to free up more bonus cash for those who remain.
Even if Goldman Sachs cuts it workforce by 4,000 staffers, it would still have more employees than it did in 2021.
The company has been in a form of hiring spree ever since Solomon took over in 2018, when Goldman Sachs retained 36,300 employee positions, the same as the previous year.
The workforce then rose to 38,300 in 2019, and 40,500 the following year. After hitting 43,900 in 2021, number swelled by more than 5,000, one of the largest spikes in the bank's recent history.
Solomon, however, previously warned that the bank needed to cut down on costs, with the looming staff reduction among the long-planned initiatives to save money.
'We continue to see headwinds on our expense lines, particularly in the near term,' Solomon said while speaking at a conference last week. 'We've set in motion certain expense mitigation plans, but it will take some time to realize the benefits.
'Ultimately, we will remain nimble and we will size the firm to reflect the opportunity set.'
Goldman Sachs previously declined to comment on the layoffs.
The investment banks' layoffs come as PepsiCo, Walmart, Gap, Zillow, Ford and Stanley Black & Decker have recently cut their white collar workforce.
The industry-wide moves are leading to fears the US is racing towards a 'white collar recession'.
In normal downturns, blue collar employees tend to lose their jobs first, but now office workers are facing mass culls.
A report by KPMG said more than half of US chief executives are considering job cuts in the next six months.
Dave Gilbertson, VP at software maker UKG, told the Financial Times: 'I wouldn't at all be surprised if white-collar workers do end up being the first to be let go in a recession scenario.
'If you look at where the lay-offs have been already, it really hasn't driven to the blue-collar markets yet. That is because there's such a severe labor shortage in these blue-collar roles.'
Last month, Meta, which owns Facebook, Instagram and WhatsApp, revealed that it will cut 13 percent of its workforce, while Elon Musk axed half of Twitter's employees following his successful takeover of the social media site.
Experts have warned industries are facing a 'triple whammy' of a slowing economy, inflation and an end to pandemic-era stimulus measures.
Overall, US-based tech companies have scrapped over 28,000 jobs so far this year, more than double a year earlier according to a report by Challenger, Gray & Christmas, which tracks such announcements.
In October, layoffs increased by 13 percent - the highest jump since February 2021. US employers also eased their hiring in November, with job creation slowing the most it has since January 2021.
Just 127,000 jobs were created last month, much less than analysts expected and nearly half the 239,000 jobs created in October.
Companies that enjoyed huge growth during the pandemic, particularly those in tech and e-commerce, are starting to pare back on spending ahead of what financial chiefs fear will be trying times.
However, the US unemployment rate in November remained near historic lows at 3.7 percent, according to the US Department of Labor statistics.
By Keith Griffith
December 28, 2022
