Make no question about it – despite what the “data” shows and what the Fed says – the job market is, in fact, softening.
We’ve spent the last two weeks writing about how Wall Street firms are going to be cutting their bonus pools significantly, with higher rates throwing a wet blanket over dealmaking and earnings for many firms.
Now, it looks as though the layoffs on Wall Street are hitting high gear. Not one to be last or least decisive to act, Goldman Sachs announced this week that it is going to lay off as many as 4,000 of its employees, according to Semafor and Reuters on Friday morning.
Other Wall Street firms like Citigroup have also announced some cutbacks in staffing, but none as meaningful as Goldman’s cuts. The company’s managers are being “asked to identify low performers for what could be a cut of up to 8% to its workforce early next year”, the Semafor report said this morning.
The move is meaningful even when compared to Goldman’s usual lightening of its workforce, which includes between 2% and 5% of employees either being laid off or receiving no bonuses as part of efforts to trim the business.
Reuters reported Friday morning that Goldman’s headcount, even after the layoffs, will still remain above pre-pandemic levels.
Goldman didn’t partake in its routine cuts in 2020 and 2021 due to the pandemic – and then the ensuing boom that followed.
“…the firm has clearly overspent and over-hired, acting more like a tech company being cheered on by venture capitalists than a Wall Street bank bearing the scars of past crises of overexuberance. [CEO David] Solomon is now moving to stem those losses,” wrote Semafor’s Liz Hoffman.
Recall, just days ago we noted that Goldman was curtailing originating unsecured consumer loans. The move marks a noticeable pivot from the bank’s previous plans of trying to get closer to retail banking, which they were doing through their Marcus offering, which provided services like personal loans and high yield savings, similar to combining the features of lenders like Sofi and Upstart with the savings products from companies like Capital One.
But that experiment looks to be on its last legs. Goldman hasn’t officially commented on the report yet but the bank has been in the midst of cost cutting measures for several months. As we noted then, Goldman was one of the first banks to announce layoffs this season.
Recall, in 2018, we explained how Goldman Sachs had switched from betting against Subprime (Residential Mortgage Backed Securities and their various synthetic and “squared” derivatives) to betting with Subprime (hoping to profit off America’s sub-660 FICO population by lending to it).
Goldman’s credit card business, anchored by the Apple Card since 2019, had arguably been the company’s biggest success yet in terms of gaining retail lending scale, but as we detailed in September 2022, rising losses threaten to mar that picture.