Suffering from one of its worst years since 1990, Goldman Sachs & Co. reportedly plans to lay off 900 employees, or 10% of its workforce. Further reductions are likely at the firm.
The number of layoffs was first reported in yesterday's Wall Street Journal. A spokesman for Goldman Sachs confirmed that layoffs would take place but refused to specify a number. "It's company policy not to comment on speculative numbers," he said
One area expected to be hit hardest is the municipal bond department where approximately 15% of the staff will be trimmed. Municipal bond underwriting activity has dropped precipitously from last year's levels and many municipal bond departments have shed employees as a result.
In a statement released yesterday, Goldman said, "As previously announced, due to prolonged, industry-wide turndown, some belt-tightening has been necessary. Each business unit and office has been doing their own reassessment and several have made small, selective staff reductions where appropriate; others are still in the midst of a review process."
This is the second time in two months that Goldman has laid off employees. In October, 500 workers in the fixed-income department and the J. Aron commodities division were let go.
The possibility of layoffs has been known inside the firm since August when the firm's management committee notified department heads of its company-wide cost containment program. In a memo to employees last month, the company announced reductions in both compensation and bonuses this year.
Goldman Sachs was the most profitable firm on Wall Street last year with $2.7 bilhon in profits. This year, however, has been a different story. A slowdown in trading activity and underwriting coupled with rising interest rates has contributed to a decline in profits at Goldman, and most other firms.
Merrill Lynch & Co., and PaineWebber Group Inc., are just two more of the top-tier firms to let go of workers this year.
Industry observers sav given the current state of the financial markets, staff reductions at other firms won't be surprising.
Guy Moszkowski, a senior analyst at Sanford C. Bernstein & Co. said layoffs could continue depending on a number of factors. "If things get worse, if interest rates rise, and trading volume and underwriting drop through '95, firms of course will have to look at their head count.
"Interestingly, some firms expanded their head count internationally, under the assumption that there would be growth in the non-U.S. market. Contrary to expectations, there has been a correlation in the economies both here and abroad."
"It's hard to say when things will stabilize as long as the Fed continues to raise interest rates," Moszkowski said.
One analyst, speaking anonymously, said "Wall Street just had a miserable year and firms are becoming more cost-conscious. More of the full-service firms are going to be harder pressed to stay profitable unless they learn to do more with less.
"If you look at the econonfic logic," he said, "this isn't quite finished. If you're a business and you start laying off people, you'll generally do it before you hand out bonuses, so there may be a hiatus for now. Whether it will pick up again depends on what happens in '95."