- The investment bank cites a slowing deal-making and uncertainty in the global economy.
- Part of the uncertainty is the fear the US economy could enter a mild recession this year.
Morgan Stanley plans to eliminate 3,000 jobs from its global workforce in the second quarter due to slow deal-making and an uncertain economic environment; sources told Reuters on Monday.
It would be the second consecutive time in quick succession that the investment bank trimmed its workforce after another 2% layoff last December. Part of the reason Morgan Stanley, which currently employs 82,000 people, cited in the recent past, includes a slowdown in mergers and acquisition deals and raising funds for its clients.
Last quarter, the New York-based bank saw its profits drop year-over-year, with a 32% decline in merger advisory and a 22% decline in its equity-underwriting business. Overall, the Wall Street banks have reported minimal Initial Public Offerings among startups amid a bearish market sentiment.
Feared Mild Economic Recession
More importantly, growing fears that the global economy, specifically the US, could be sliding into a recession is weighing down on investment banks, including Morgan Stanley, pushing the need to reduce expenses. The firm’s chief financial officer, Sharon Yeshaya, recently commented that expense management was a priority considering the broader market uncertainty and the high inflation rate.
Recent coverage by Distributed showed that the US economy might enter into a mild recession in the face of another lending rate hike by the Federal Reserve to tackle the soaring inflation rate. Specifically, the Fed is expected to hike interest rates by a 25 basis, bringing the benchmark borrowing rate to between 5 and 5.25%, a step the economists fear could slow down growth and lead to a mild recession later in the year.