Goldman Sachs to cut 3,260 jobs
Goldman Sachs is cutting about 10% of its workforce, which points to more trouble in the credit markets.
NEW YORK (CNNMoney.com) -- Goldman Sachs will cut 10% of its workforce, or about 3,260 jobs, a source familiar with the investment bank's plans said Thursday.
The source cited "unprecedented difficult conditions in the financial markets," as the impetus for the cuts, which will be company-wide.
Cutting 10% will bring the company's headcount down from a record high of 32,569 employees to 2006-2007 levels.
As part of a financial rescue strategy in the wake of the nation's credit crisis, Goldman Sachs (GS, Fortune 500) was one of eight leading banks in the nation that signed up for a government plan that would invest up to $250 billion in ailing financial institutions.
Sources familiar with the bailout plan said in mid-October that Goldman Sachs stood to receive $10 billion of that money to help stabilize the former stand-alone investment bank.
Goldman Sachs and Morgan Stanley (MS, Fortune 500) were the last remaining investment banks on Wall Street before federal officials granted the firms' requests to become bank holding companies last month.
The decision to become commercial banks came as rival brokerages Bear Stearns and Lehman Brothers collapsed. The move allows both institutions to create commercial banking operations that can take deposits. But as banks, Morgan and Goldman will be forced to take less risk, which will mean fewer profits.
"This downsizing is inevitable due to the fact that Goldman Sachs is now under government control and is not making as much money," said Dr. Michael Williams, dean of the Graduate School of Business for Touro College.
Financial firms have eliminated an estimated 110,000 jobs over the past year, through September, according to the latest employment figures from the Department of Labor.
But the pain has been particularly acute on Wall Street. Investment banks and brokerages there have shed about 11,000 jobs, according to the latest figures from the New York State Department of Labor.
Experts say there will be even more job cuts to come. "We will have more job losses on the Street," according to David Schwartz, head of executive search firm DN Schwartz & Co in New York, and the former head of investment-banking recruiting in London for Goldman Sachs.
"If Goldman cuts 10%, others can't be far behind."
And news of more layoffs on Wall Street may come sooner rather than later. "Most organizations don't want to deal with the liability of letting people go between Christmas and New Years," explained Paul Bernard, a veteran executive coach and career management adviser who runs his own firm. "There's a window right now."
But even those that are not at risk of losing their jobs will likely take a hit to their compensation package this year. "Goldman is a sign that everyone has to batten down the hatches," Bernard said.
Wall Street executives will likely see their bonuses cut 30% to 40%, according to Alan Johnson, managing director of Johnson Associates. And, "there's almost no expectation that 2009 will be even better."
Wall Street bonuses totaled $33.2 billion in 2007, down just 2% from a record high the year earlier, according to the New York state comptroller's office. The average bonus was $180,420 last year.