Wall Street firms begin major layoffs

Two of Wall Street's biggest firms started cutting thousands of jobs on Wednesday, with Goldman Sachs reducing its workforce by up to 3,200, and BlackRock by up to 500.

A sharp downturn in investment banking and difficulties in retail banking are driving the cuts at Goldman. It is one of the biggest rounds of layoffs at the company since the 2008 global financial crisis. Goldman has also struggled to gain traction in consumer banking despite hefty investments.

The Federal Reserve's aggressive interest rate hikes also have hit the markets and earnings at financial firms.

Goldman had just over 49,000 employees at the end of September. Even after this week's layoffs, the company's headcount is expected to be larger than it was before the pandemic.

The cuts represent about 6.5 percent of the workforce at Goldman, which skipped the annual cull of staff in both 2020 and 2021. Meanwhile, the company reportedly is still moving ahead with plans to hire junior bankers and in other areas as needed.

A spokesman for BlackRock, the world's largest asset manager, cited "an unprecedented market environment" as the reason for the layoffs, which represent about 3 percent of its workers. The company said after the layoffs it will still have more employees than it did a year ago.

BlackRock grew its workforce by more than 20 percent over the past three years, as it and other Wall Street firms hired aggressively during a market boom.

Chris Kotowski, an analyst at Oppenheimer and Co, said everyone working on Wall Street gets accustomed to these kinds of staff reductions, as it is part of doing business.

Other Wall Street firms are also trimming headcount. Morgan Stanley is cutting about 2 percent of its global workforce, and other investment banks might make cuts in the coming weeks depending on whether revenues are tracking below estimates in February and March.

"If things haven't gotten better in the first quarter, we'll have more changes," said Alan Johnson, a compensation consultant. "You can't have these expensive people sitting around with nothing to do."

The layoffs come as Wall Street firms prepare to announce bonuses for 2022, and analysts have been saying for weeks these payouts will be greatly reduced at all levels.

The layoffs aren't limited to Wall Street. Dow Jones, a division of News Corp that includes The Wall Street Journal, Barron's and MarketWatch, plans to lay off employees on Thursday, according to IAPE, the union representing unionized Dow Jones employees. Dow Jones has not officially announced any layoffs.