The sovereign debt crisis and bank failures may be happening across the pond. But they continue to take their toll on New York.
More than 4,000 people lost their jobs in the city’s securities industry between April and August, as the anemic domestic economy and fresh fears over Europe’s debt crisis hit the financial sector, according to a report released on Tuesday by New York State Comptroller Thomas DiNapoli. An additional 10,000 jobs could be cut by the end of next year, bringing the total losses on Wall Street to 32,000 since 2008, the report said.
“It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year,” DiNapoli said in a statement on Tuesday. “As we know, when Wall Street slows, New York City and New York State’s budgets feel the impact and that is a concern.”
With the broader U.S. economic continuing to suffer, Wall Street has become a focal point of Main Street’s anger. Protestors at Occupy Wall Street, the demonstrations in downtown New York City, are set to march past the homes of big finance chiefs like Jamie Dimon at JPMorgan Chase.
But Wall Street staffers are feeling the fallout from the financial woes. Banks like Goldman Sachs and Bank of America, which report third quarter earnings in the coming days, have announced major job cuts in anticipation of weaker profits.
The downturn will likely have an immediate impact on the city’s coffers. According to the Comptroller’s annual report, tax receipts from securities industry-related companies will total nearly $2.6 billion in 2011. That represents roughly 7 percent of the City’s overall tax revenues – well below the pre-recession level of 13 percent.
The reduced tax bill comes as NYSE member firms’ broker and dealer operations report reduced profits. According to DiNapoli, pretax profits totaled $27.6 billion in 2010, an 18 percent drop from the year before.
Worse could be in store for 2011. The comptroller estimates NYSE member firms may not even muster $18 billion in pre-tax profits for this year. The city expects earnings to start recovering next year, rising to $20 billion.
For those able to hold onto their jobs, Wall Street remains a lucrative place. Compensation at NYSE member firms totaled $37.2 billion for the first half of 2011, an almost 19 percent jump from the previous year.
The industry’s salaries also continue to outstrip other sectors. DiNapoli said the average pay packet in New York City grew by 16.1 percent to $361,330 in 2010. That is almost 6 times greater than the average salary for the rest of the private sector.
The disparity has been growing for thirty years. In 1981, the average salary in the securities industry was only twice that of the rest of the private sector.