Biggest U.S. banks beef up workforces even with recession looming

Even amid the tightest labor market in half a century and fears of a recession on the horizon, banks are still adding to their ranks. 

Goldman Sachs Group, Morgan Stanley, JPMorgan Chase and Citigroup each reported a substantially larger workforce in the second quarter compared with a year earlier. New York-based Goldman had the biggest boost in employment, increasing its staff by 15%. Across the six biggest U.S. banks, the average gain in employment was 5.5% compared with mid-2021. 

Michael Nagle/Bloomberg

Recent market volatility has proved a blessing for Wall Street firms with hefty trading operations, such as Goldman and Morgan Stanley, where more manpower is needed to capitalize on big swings. But the push for bigger workforces isn’t uniform across large U.S. banks. High interest rates have spurred lenders that focus on consumer banking to pare down staff as demand slows for some loan products, most notably mortgages.

While the likelihood of a recession is increasing, Morgan Stanley CEO James Gorman reassured investors during an earnings conference call last week that his bank hasn’t changed direction yet. Still, the bank has a big tool for dealing with any slowdown: controlling compensation to keep expenses from ballooning.

“We’ve got a very clear handle on headcount growth,” Gorman said. “If things really deteriorated, particularly in the U.S., then we’d take a much more aggressive position. And we obviously have the ultimate weapon, which is comp.”

Goldman Chief Financial Officer Denis Coleman also suggested the firm was bracing for any economic downturn on his firm’s earnings call Monday. “We’re taking a number of actions to improve our operating efficiency,” he said. “Specifically, we have made the decision to slow hiring velocity and reduce certain professional fees going forward.”

Not all of the country’s biggest banks have been adding to their staffs. In the second quarter, San Francisco-based Wells Fargo trimmed its staff by 6% from a year earlier, and Bank of America, based in Charlotte, North Carolina, reduced its workforce by 0.8%. Both companies are known for their sizable brick-and-mortar footprints and large consumer banking operations.

Even for a firm like JPMorgan, which ramped up hiring in every division last quarter, not all added at the same clip. Its consumer and community banking unit, which includes its home-lending unit, hired at the slowest pace of any business line.

During the pandemic, retaining and recruiting talent became costlier than ever. The summer of 2021 saw an outright bidding war for junior staff as banks jockeyed for talent through bigger and bigger pay bumps amid a surge in dealmaking at the time.

A year later, the stock market is in bear territory and interest rates are climbing, In June, JPMorgan began laying off and reassigning hundreds of home-lending employees. Wells Fargo, the biggest mortgage lender among U.S. banks, also laid off and reassigned employees in its home-loans division. 

Even with big banks continuing to hire, job cuts are expected to deepen across New York City’s securities industry, according to an October report from New York State Comptroller Thomas DiNapoli. With a possible recession looming, banks may not need all the employees they’ve been adding — but also are likely to have an easier time retaining those they choose to keep.

“At the end of the day, people have to work somewhere,” Gorman said at the Australian Financial Review Business Summit in March. “If the economy turns south a little bit, I think you’ll see much less job mobility than in the last 12 months.”