Goldman Sachs is slowing hiring. Should you be scared?
It's been a fine run at Goldman Sachs, but the good times may be coming to an end.
In the past year, Goldman has added 6,100 people. In the past two years, it's added 10,000 people. During the past five years, it's increased headcount 39%.
However, speaking in yesterday's investor call to mark the release of its third quarter results, Goldman CFO Denis Coleman indicated that the tide is turning. Though Goldman still intends to be "nimble" and "strategic" about hiring, Coleman said it also intends to "slow hiring velocity." He said something similar in the second quarter, with the added caveat then that Goldman also wouldn't be replacing people who left through "attrition."
Goldman Sachs isn't the only big bank making restrained noises about hiring. Headcount at Wells Fargo is down 5.8% year-on-year as the bank pursues "efficiency initiatives." James Gorman at Morgan Stanley says they're "obviously...looking at headcount." Blackrock sounds distinctly as if it has a hiring freeze.
So is this reason to be alarmed? Well… not necessarily. There's still plenty of positivity. Bank of America CFO Alastair Borthwick, for example, said this week that the bank will "continue to make steady investments in [their] people, technology, marketing and financial sectors." Citi's Jane Fraser says the bank is "investing heavily" as per the plans it outlined at investor day when it outlined its commitment to hire in "high growth sectors" like tech, healthcare and fintech.
Jamie Dimon's comment on hiring was most telling, though. When the JPMorgan CEO was asked whether he had considered waiting to hire people, having increased headcount from 266k to 288k, in order to get them more cheaply in the future, his answer was a flat out no.
Even Gorman acknowledged that "you’ve got to keep investing" to achieve success.
There might be something in it. Although investment banking fees have fallen off a cliff this year, glass-half-full types suggest this is merely postponing the inevitable and that next year will be all the more vibrant and full of deals as a result. David Bauer, managing director at investment firm KKR, told the FT recently that private capital is ready to buy "re-rated" public companies.
Headhunters are also bullish. Julian Bell, head of the US business at search firm Sheffield Haworth suggests proactive banks smell blood and says,"several banks are committed to ongoing growth and investment and the stronger ones will hire at the expense of the weaker." Co-founder of advisory boutique Loxley Partners, Barney Mundell, says hiring has slowed but that this is simply a return to normality and that pre-February was "fever pitch." He says hiring is currently strategic and focused on areas like healthcare and tech banking.
It's not just about front office banker hires though. Infrastructure and technology is still where the recruitment is mostly at. Morgan Stanley CFO Sharon Yeshaya said "infrastructure and controls" are key to "expanding the business." Gorman said there's an "enormous amount of work going on" in tech. David Solomon at Goldman said investments in "technology infrastructure," and presumably engineers, are key.
While 2023 may not be quite as busy for recruitment as 2022, it's also, therefore, unwise to write it off entirely. Banks will still be hiring next year. Or, if they won't, they're not saying so just yet.
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