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Goldman Sachs Brings Back Wall Street Tradition With Hundreds Of Cuts This Month

The first major bank on Wall Street kicked off layoff season by cutting hundreds of jobs across the firm.  This move is attempting to reign in expenses amid a collapse in deals volume. According to a person with direct knowledge of the situation, the firm is reinstating an annual tradition of employee layoffs, targeting personnel between the bottom 1-5% of lower-level performers throughout the company.

The Year-End Tradition on Wall Street

Goldman is likely not the only bank to be cutting workers this fall. Before the COVID-19 pandemic, banks similar to Goldman on Wall Street typically would lay off their lowest-performing employees in the months after Labor Day, before bonuses are paid out. This practice came to a halt over the last couple of years due to a hiring boom as an aftereffect of the pandemic but now seems to be creeping back into place.

Major declines in investment banking activities, specifically IPOs (Initial Public Offerings) and junk debt issuance created the need for the first big layoff since 2019. The bank declined to comment on the timing of these cuts, however, it was reported earlier by the New York Times when they quoted Dennis Coleman, Goldman’s CFO, saying the company was, “probably reinstating our annual performance review of our employee base at the end of the year.”

Decline in Profits Causing Job Cuts

It was reported that the bank saw a 48% decline in second-quarter profits in comparison to last year’s second quarter.  Additionally, estimated revenue of $2.1 billion from its investment banking division is expected, which is a 41% drop from last year. The bank did warn their employees that they are further considering cutting expenses as the economic outlook worsens, which unfortunately means “trimming the fat” of the expendable lower-level employees.

Wrap Up

It is an unfortunate process these banks go through every year, and is sure to be one met with a negative connotation.  We will have to wait and see how this will impact the rest of the job market as well, potentially sending a ripple effect through America’s economy.

 
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