Morgan Stanley lays off 2% of workers - about 1,600 people

Morgan Stanley has cut about 2 percent of its workforce, a source familiar with the company's plans said on Tuesday.

The job cuts, first reported by CNBC, affect about 1,600 positions out of Morgan Stanley's global workforce of more than 81,000 employees.

It follows workforce reductions at Goldman Sachs and Citigroup, as banking giants return to the annual culls of 'underperformers' that were common prior to the pandemic.

Most investment banks slash the bottom 1 to 5 percent of employees just before bonus time, to free up more bonus cash for those who remain. 

Morgan Stanley Chief Executive Officer James Gorman said last week that the company would be making modest job cuts worldwide.

Morgan Stanley Chief Executive Officer James Gorman is seen last week. Morgan Stanley has cut about 2 percent of its workforce

The job cuts affect about 1,600 positions out of Morgan Stanley's global workforce of more than 81,000 employees. The investment bank's headquarters in New York is seen above

While financial advisers in Morgan Stanley's wealth management division are not being let go, there will be job cuts in the unit, the source said.

Wealth management accounted for 47 percent of the bank's revenue in the third quarter.

It comes as the biggest US banks are bracing for a worsening economy next year, with inflation threatening consumer demand, several top executives said Tuesday.

JPMorgan Chase CEO Jamie Dimon told CNBC that consumers and companies are currently in good shape, that may not last much longer as the economy slows down and inflation erodes consumer spending power, he said.

'Those things might very well derail the economy and cause this mild to hard recession that people are worried about,' he said.

Consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but it may run out some time in the middle of next year, he told CNBC. 

JPMorgan Chase CEO Jamie Dimon told CNBC that consumers and companies are currently in good shape, that may not last much longer as the economy slows down

Dimon also said the Federal Reserve may pause for three to six months after raising interest rates to 5 percent, but that may 'not be sufficient' to curb high inflation.

The U.S. central bank last month raised rates by 75 basis points for the fourth consecutive meeting to 3.75 to 4 percent, but it also signaled it hoped to shift to smaller hikes in borrowing costs as soon at its next meeting.

Meanwhile, Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that Bank of America's research shows 'negative growth' in the first part of 2023, but the contraction will be 'mild.'

'Economic growth is slowing,' Goldman Sachs' chief executive David Solomon said. 'When I talk to our clients, they sound extremely cautious.'

In banking, the job market remains 'surprisingly tight' and competition for talent is 'as tough as ever,' he said.

A growing number of companies have responded to the slowing economy by slashing jobs in a bid to reign in costs. 

Federal Reserve Board Chairman Jerome Powell is seen in a file photo. The Fed will hold its next meeting on rate hikes December 13-14.

Job cuts announced by U.S.-based employers jumped 13 percent to 33,843 in October, the highest since February 2021, according to a report. 

Last week, AMC Networks said it would cut about 20 percent of its U.S. workforce, as it announced Chief Executive Officer Christina Spade had stepped down, less than three months into the role. 

Facebook-parent Meta said it would cut 13 percent of its workforce, or more than 11,000 employees, in one of the biggest tech layoffs this year as it grapples with a weak advertising market and mounting costs. 

Amazon laid off some employees in its devices group as a person familiar with the company said it still targeted around 10,000 job cuts, including in its retail division and human resources.