Layoffs Used To Lift Stocks—Now They Knock Them Down, Goldman Sachs Finds

In a recent analysis, Goldman Sachs (NYSE:GS) analysts have observed a notable shift in how investors respond to layoff announcements.

Stocks Record Decline

Traditionally, layoffs tied to strategic restructuring would result in stock price increases. However, new data indicates that stocks are now declining by an average of 2% when layoffs are linked to automation and technological advancements, according to a report by Fortune.

Goldman Sachs analysts suggest that the market is reacting negatively to layoff announcements, even when companies provide seemingly benign reasons, indicating concerns about the prospects of these companies.

The analysts noted that firms announcing layoffs have been experiencing higher capital expenditures, debt, and interest expenses, along with lower profit growth compared to their industry peers.

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This trend is significant as executives, including Amazon.com Inc. (NASDAQ:AMZN) CEO Andy Jassy and JPMorgan Chase & Co. (NYSE:JPM) CFO Jeremy Barnum, have openly discussed AI-driven efficiency gains that potentially reduce workforce needs.

AI Adoption And Job Cuts

The shift in investor sentiment comes amid a broader context of evolving workforce dynamics. A Goldman Sachs survey found that only 11% of companies are cutting jobs due to AI adoption, with many using AI to boost productivity and revenue instead.

Despite this, the U.S. labor market is experiencing significant upheaval, with layoffs soaring and AI quietly replacing workers at an unprecedented pace.

In October, U.S.-based employers announced 153,074 job cuts, marking a 175% increase from the previous year. This has prompted many mid-career professionals to seek further education in fields like AI and cybersecurity.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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