Goldman Sachs cuts jobs
Financial giant Goldman Sachs has revealed plans to cut 3,200 jobs after January 11.
This number is equivalent to about 6.5% of the company’s total workforce of 49,100 as of October 2010, and is said to be the largest since the 2008 financial crisis.
Although it falls short of the “up to 4,000 job cuts” plan that Goldman CEO David Solomon announced internally at the end of 2022, it has lowered its first-quarter earnings forecast. If that happens, there is also a view that further personnel reductions may occur.
Since 2020, Goldman Sachs has expanded its workforce in response to the booming market in the phase of large-scale monetary easing after the spread of the new coronavirus infection. However, in 2022, when the US Federal Reserve Board (FRB) turned to raising policy interest rates, financial markets cooled significantly.
In addition to Russia’s military invasion of Ukraine, corporate trading activity, including acquisition deals and new stock and bond issuances, has slowed significantly in an environment of unstable global financial markets due to high inflation including rising energy costs.
The job cuts are expected to be across the board, but most likely in core businesses such as investment banking and trading. Goldman Sachs’ Q3 2022 earnings fell only 12% year-over-year, while its investment banking division was down 57% year-over-year.
Preparing for an economic recession?
On the 5th, it was just revealed that e-commerce giant Amazon plans to cut more than 18,000 jobs. U.S. company Meta (formerly Facebook) also announced at the end of 2022 that it would cut 11,000 jobs, or 13% of its total workforce.
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Job cuts by large companies are often part of preparations for an upcoming recession. This was the scene seen in 2008 and 2009, when the Lehman shock spread the financial crisis and plunged the global economy into recession.
The Fed has raised interest rates over the past year in an effort to fight inflation. However, there are concerns about recession risks if austerity monetary policy goes too far. If that happens, the market will be more interested in when the Fed will shift to monetary easing to boost the economy.
At the US Federal Open Market Committee (FOMC) meeting in December 2010, the Federal Reserve (FF) interest rate hike was reduced from 0.75%, which lasted for four meetings, to 0.50%. If the US Consumer Price Index (CPI) scheduled to be released on January 12 is on a downward trend, the Fed Funds rate hike at the FOMC meeting in February is expected to remain at 0.25%. The 10-year US Treasury yield fell from 3.75% to 3.5% on the morning of the 10th.
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