Goldman Sachs analysts have identified a notable shift in how investors respond to corporate layoff announcements, finding that even job cuts attributed to automation and AI-driven restructuring are now causing stock prices to fall rather than rise. The investment bank linked recent layoff announcements to public companies' earnings reports and stock market data, concluding that stocks dropped by an average of 2% following such announcements, and companies citing restructurings faced even harsher punishment.
The traditional Wall Street playbook held that layoffs tied to strategic restructuring would boost stock prices, while cuts driven by declining sales would hurt them. That distinction appears to have collapsed.
Goldman's analysts suggest investors simply don't believe what companies are saying -- firms announcing layoffs have experienced higher capex, debt and interest expense growth alongside lower profit growth compared to industry peers this year. The real driver, analysts suspect, may be cost reduction to offset rising interest expenses and declining profitability rather than any forward-looking efficiency play.
Goldman expects layoffs to keep rising, motivated in part by companies' stated desire to use AI to reduce labor costs.
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