Before Lehman Brothers went bankrupt and Merrill Lynch & Co. was forced to sell itself, the deepening subprime mortgage crisis had prompted estimates of Wall Street job losses to soar from 2,000 to 33,000 during the current downtown.
Now, those numbers could climb even higher.
“Certainly, the events of the last few days give stronger reason for concern,” said Doug Turetsky, chief of staff of the Independent Budget Office, on Monday, September 15.
While most Lehman workers are facing unemployment, many, if not most, Merrill employees will keep their jobs under Bank of America since there is not much of an overlap between the two companies.
Economists at the Independent Budget Office, which made the 33,000-job-loss-prediction in May, were scheduled to go back to the drawing board Monday afternoon to determine if the day’s events warrant a revision. “That number presumed some upheaval,” said Turetsky. “It’s hard to weigh whether it presumed enough.”
Securities firms in the city have already cut 11,000 jobs since the employment peak in the summer of 2007, according to the state Department of Labor. And more are likely to come on the books as announced layoffs take hold.
Just how bad things will get is an open question. James Parrot, an economist with the Fiscal Policy Institute, said the earlier estimates of 30,000-plus securities job losses already took into account the turmoil in the mortgage markets.
“Part of that forecast was, there would be a lot of decline on Wall Street,” he said. “We didn’t know exactly how it would manifest itself.”
What is clear is that the pain will be widespread.
Since Wall Street is the driving force of the local economy—the sector accounted for 5 percent of the city's jobs but 23 percent of its wages in 2006—the cutbacks will reverberate throughout New York. Each securities job creates two others, according to the state comptroller’s office, and the pain will be felt everywhere from retail and restaurants to law and accounting. Economists have predicted that the city will lose 60,000 to 90,000 jobs during this downturn.
“When one of your key industries is suffering dramatic downturns and bankruptcies, that’s going to have a spillover effect,” said James Brown, an economist at the state Department of Labor.
Leonard Logsdail owns a company that makes custom clothes, including suits that go for $2,500 and up. He hasn’t had any orders canceled yet, but said his 37 years in business means he knows what’s coming.
“I’ve seen all these swings,” he said. “It makes everybody put their purchases on hold. Historically, the phone will go dead for a couple of weeks.”
Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
Crain’s reporter Adrianne Pasquerelli contributed to this story.
