Due to a lack of transaction activity in 2021, Wall Street behemoth Goldman Sachs is taking dramatic measures to reduce expenses and improve efficiency. Up to 4,000 employees, or 8% of the company’s total, could be let go, according to the announcement. These significant employment layoffs coincide with news that some employees’ year-end incentives may be scaled back or eliminated.
The layoffs will reduce Goldman Sachs’ overall workforce from approximately 38,000 to roughly 38,000, which is less than it was before the epidemic struck but still more than any other Wall Street company. Goldman Sachs is still in a strong position to weather the storm caused by the year’s lackluster M&A and IPO activity, despite this huge employee decrease.
Due to the fact that there have been fewer IPOs this year—only 127 have been made public as of this writing—deal-making has significantly decreased in 2021 compared to 2020. Morgan Stanley just made 1,600 layoffs, while Citigroup and Barclays are also implementing smaller reductions. Goldman Sachs may be hurt harder because it depends more on fees from deals than other Wall Street corporations.
Because there will be fewer traders and analysts who can effectively assess risk and make informed judgments when buying or selling assets, economists believe that these employment losses could have a detrimental impact on markets soon. Some claim, however, that because of the pressure these layoffs place on the surviving employees, they may become more productive and, as a result, produce better long-term outcomes for the company in terms of profitability and market share.
Investment banks may be forced to restructure their businesses as a result of these unsettling times; cost-cutting strategies like staff reduction may help them get ready for future changes as technology continues to replace human labor. If Goldman Sachs wants to maintain its position at the top of the Wall Street food chain over the coming years, it will need to make the necessary adjustments in order to remain competitive against rivals like JPMorgan Chase, who have already implemented significant digitalization initiatives like artificial intelligence software.
The most recent round of layoffs at Goldman Sachs, one of the top investment banks in the world, serves as a crucial reminder that even strong companies are susceptible to market volatility and economic uncertainty brought on by factors beyond their control. Businesses today more than ever need to be adaptable if they want to survive in the quickly shifting markets.