— This is the script of CNBC's financial news report for China's CCTV on December 7, 2022.
U.S. investment bank Morgan Stanley kicked off layoffs on Tuesday, people with knowledge of the layoffs told CNBC. Morgan Stanley has around 80,000 employees. There is a possibility that they will cut about 2% of their staff, which would impact around 1,600 employees.
Following Goldman Sachs and Citigroup, Morgan Stanley has reinstated a Wall Street ritual: the annual culling of underperformers which means these banks typically trim 1% to 5% of those they deem their weakest workers before bonuses are paid, leaving more money for remaining employees.
This ritual had been put on hold during the Coronavirus pandemic. At that time, the Federal Reserve implemented an easy monetary policy. Additionally, the demand for loans increased. As a result, the financial market became very active for a period of time and a hiring boom began to develop.
In recent years, Morgan Stanley has experienced an increase in headcount similar to its peers. Between the first quarter of 2020 and the third quarter of this year, the bank's employee ranks increased by 34%.
But as the Federal Reserve began its interest rate hike cycle, liquidity tightened in the financial sector, and investment banking was hit particularly hard.
Since the first quarter of 2022, Morgan Stanley has experienced a reduction in net revenue year-over-year. The company's third-quarter earnings report showed net revenue of $12.986 billion, down 12% from the same period last year. The company's investment banking business declined 55.2% year-over-year in the third quarter. Analysts believe that the business is likely to face challenges for some time due to the Federal Reserve's continued interest rate increases.
The technology industry recently experienced a wave of layoffs, but the layoffs actually spread to other "white-collar" industries, including finance, real estate, automotive, and so forth.
Approximately 17,000 layoffs have been announced by the financial sector this year, compared to about 8,000 in the same period last year, according to CGC (Challenger, Gray & Christmas), a U.S. employment consulting firm. There have been about 30,000 layoffs in the auto industry. There have been nearly 8,000 layoffs in the real estate industry so far this year.
According to CGC data, U.S. employers laid off approximately 76,000 workers in November alone this year, which is more than double the cuts announced in October and four-times the number of cuts announced last November. James Knightley, chief international economist at the financial services firm ING suggests that we could still be at the beginning of job cuts given the slowing economy.
Jamie Dimon, CEO of JPMorgan Chase, also commented on the recession in an interview with CNBC. He believes that While consumers and companies are currently in good shape, that may not last much longer. Consumers have $1.5 trillion in excess savings from Covid pandemic stimulus programs and are spending 10% more than in 2021, he said, but inflation is eroding all of that.
Jamie Dimon
JPMorgan Chase, CEO
"Inflation is eroding everything I just said. And that trillion and a half dollars will run out sometime mid year next year. And so when you're looking at forward, those things, may very well derail the economy and cause mild or hard recession that people are worried about."
It was revealed in The Conference Board's survey of CEOs that confidence among CEOs is at its lowest level since 2009, with 98% of respondents preparing for a recession in the U.S.