Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS), and Bank of America (NYSE: BAC) have each announced plans to cut or slow spending on staff and new hires as fears mount about a potential economic downturn.
After the firm's first round of layoffs in September, Goldman Sachs CEO David Solomon says that the bank may have to introduce staff cuts in the coming months. Solomon also announced that bonus pools for traders and salespeople will be 10% smaller this year as Goldman attempts to reduce expenses.
"This year, some of the good money traders made will have to go fund the other parts of the bonus pool," a person with knowledge of Goldman's processes told CNBC.
At Morgan Stanley, roughly 1,600 of the bank's 81,567 employees were laid off on December 6, with cuts coming from nearly every department.
At Bank of America, CEO Brian Moynihan says that his firm doesn't lay people off, but the bank's workforce is still expected to shrink. Moynihan said at a conference that the bank has "an ability to reshape our headcount pretty quickly just by the turnover that occurs."
"We're up to about 215,000 [employees]; we need to run that back down," Moynihan added.
These labor cuts are part of the firms' ongoing efforts to prepare for a potential recession, but they aren't necessarily that unusual. In fact, it's common for big firms to cut anywhere between 1% and 5% of their staff every year in an effort to trim out their lowest earners.
Citigroup (NYSE: C) and Barclays (NYSE: BCS) have both carried out their staff culling for the year, and JPMorgan Chase (NYSE: JPM) says it expects to shrink bonuses and lay off its weakest workers later in the year.
"Some people are going to be let go," Morgan Stanley CEO James Gorman said. "In most businesses, that's what you do after many years of growth."
When the pandemic started, a boom in investing meant these layoffs weren't needed, and in the first quarter of 2020 alone, Morgan Stanley saw its staff increase by 34%.
However, early this year, the market saw a sharp decline thanks to collapses in the IPO and stock issuance sectors, accompanied by steep interest rate increases from the Federal Reserve. The Fed's recovery has yet to materialize, and by the summer of 2022, it was clear that Wall Street would need to cut expenses.