Goldman is letting go of low performers after its low earnings report
The investment giant reported second-quarter earnings of $2.93 billion in July this year — significantly lower than the $5.49 billion that was pulled in during the same time in 2021.
“No question that the market has gotten more challenging,” David M. Solomon, Goldman’s chief executive, said on a call with analysts. “We have made the decision to slow hiring velocity and reduce certain professional fees going forward.”
Goldman now seems to be reinstating its annual culling — the bank fired 1% to 5% of its underperforming staff each year prior to the pandemic. About a dozen members in the tech, media and telecommunications teams and some in the consumer retail, healthcare and industrials divisions received their pink slips last week, according to Insider.
This isn’t just limited to the U.S. Bloomberg reports that at least 25 investment bankers were fired in Asia, while Financial News states another dozen were let go in London.
It’s not just Goldman
Goldman isn’t the only Wall Street firm that’s floundering. JPMorgan’s investment banking revenue also plummeted by about 60% in its second quarter.
About $1 trillion deals were struck in 2022 through late July, according to financial markets platform Dealogic. That’s almost 40% lower than the same time last year — and also marks the lowest number of deals in five years (aside from 2020).
Analysts are predicting S&P 500 companies will report weak third quarter earnings in October, after two straight quarters of negative growth. And more layoffs are forecasted for the future.
What this means for the rest of the economy
The current deal-making drought is yet another signal that the economy could slide into a recession. After a tumultuous first half of the year with interest rate hikes, supply chain issues, conflict in Ukraine and Russian gas cutoffs, companies are veering away from mergers and acquisitions.
The national GDP fell by 0.6% for a second consecutive quarter, according to the latest estimate from the Bureau of Economic Analysis.
The National Bureau of Economic Research defines a recession as “a significant decline in economic activity” that persists for “more than a few months” — however it hasn’t made an official call yet, likely because the labor market and consumer confidence are still going strong.
So far, most economists have been predicting a recession to arrive at some point in 2023.
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