At Goldman Sachs, the New Year is starting with thousands of job cuts.

One of Wall Street's biggest banks plans to lay off up to 3,200 employees this week, as it faces a challenging economy, a downturn in investment banking, and struggles in retail banking.

It is one of the biggest rounds of layoffs at Goldman since the 2008 Global Financial Crisis.

Goldman, like many other investment banks, has seen its profits take a hit as markets have tumbled since last year because of aggressive interest rate hikes from the Federal Reserve.

The downturn has led to sharp declines in the number of deals and stock listings, as well as trading activity. Goldman has also struggled to gain much traction in consumer banking despite hefty investments.

"Wall Street is still Wall Street, and that means a very intensive environment, making money for their customers and the firm, having high intensity and adjusting on a dime as conditions change," says Mike Mayo, an analyst with Wells Fargo who has covered commercial banks for decades.

Goldman is restructuring its business

Goldman CEO David Solomon has been emphasizing the difficulty of this current economic environment.

Financial firms, like technology firms, had increased their head counts during the pandemic when business was booming, but they are now being forced to announce job cuts and to rethink how they operate. Goldman had just over 49,000 employees at the end of September.

In October, Goldman announced a broad restructuring plan. It combined trading and investment banking into one unit and created a new division that is focused on the company's digital offerings.

Goldman is also turning the page on its attempt to compete against the likes of J.P. Morgan Chase & Co. and Bank of America in retail banking.

For almost a decade, Goldman Sachs has tried to make inroads there, but its consumer-facing brand, Marcus, never caught on.

Marcus has been folded into Goldman's asset and wealth management unit as part of that restructuring, and its head announced plans to leave the firm last week.

A return to the normal practice of cutting staff

It's not just the business downturn that's sparking layoff fears in Wall Street.

Goldman Sachs and other Wall Street firms have traditionally cut low-performing staff each year, a practice they put on pause during the pandemic. Goldman, for example, didn't do these regular layoffs in 2020, 2021, and 2022.

Chris Kotowski, an analyst with Oppenheimer & Co., says everyone working on Wall Street gets accustomed to these kinds of staff reductions, difficult as they are. It's just part of the business of doing business.

"You know, people just don't work out," he says. "Sometimes you expanded into an area that just wasn't fruitful, and sometimes you've just overhired."

And even after this week's layoffs, Goldman Sachs's head count is expected to be larger than it was before the pandemic.