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Goldman Sachs Prepares for Layoffs as Deal-Making Slows

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Goldman Sachs is gearing up for a series of layoffs that could take place as early as next week, according to two people familiar with the plan.

The job cuts will affect employees across the company, the official said.

Goldman typically releases employees based on performance and the bank’s needs, and reviews its headcount annually. That program was suspended during the pandemic. This also coincided with a record trading period during which bankers complained of being overworked. The program typically lays off her 1-5% of workers. The layoffs are likely to be at the lower end of that range, according to people familiar with the matter.

Goldman’s chief financial officer Dennis Coleman told analysts in July that the bank “will probably resume employee-based annual performance reviews at the end of the year.”

The move comes as the Federal Reserve’s efforts to curb inflation by raising rates have cooled the deal’s closing, raising fears that the U.S. economy could plunge into recession. The war in Ukraine has added further uncertainty to the mix.

Goldman Sachs reported in July that its second-quarter profit fell nearly 50% from a year earlier to just under $3 billion. Earnings at Goldman’s investment banking division fell 41% from the same period in 2021. At the time, the bank said hiring would slow down for the rest of the year.

So far this year, the value of U.S. transactions has risen from $2 trillion a year ago to about $1.2 trillion, according to data firm Dealogic. Initial public offerings raised in the first half of this year were about 95% less than in the first half of last year. According to advisory firm EY,The number of deals fell by about 73%.

“The market has definitely gotten more difficult,” Goldman CEO David M. Solomon said on a conference call in July.

Mr Solomon said: “However, while we are disciplined about our spending, we keep in mind that it does not undermine our clients’ franchises and growth strategies.”

Solomon’s statement echoed similar warnings from Wall Street chief executives and was a far cry from last year’s hype. Then low interest rates and extremely high financial markets sparked a trading frenzy, and banks had to hire new workers to cope with the catastrophic trading volumes.

Still, assessing the scale necessary for layoffs can be difficult for executives across Wall Street. There are conflicting signs about the state of the U.S. economy, with some estimating we are already in, or could be in, a recession, while others are slowing. I don’t think it will shrink. And a trade that could rebound as quickly as it faltered has shown signs of optimism lately. Like Porsche’s initial public offering, As such, bankers are wary of finding themselves understaffed if transactions start to pick up again.

But for now, Wall Street banks may simply have too many dealmakers.

“They just don’t need as many bodies as they have,” said Chris Connors, vice president of compensation consulting firm Johnson Associates. ‘Production fell off a cliff’

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