Sky-high profits at New York’s largest investment firms mean the securities industry will likely shed about 25 percent fewer jobs in New York City than expected, a report by the New York state comptroller said Tuesday, November 17.
The rebound on Wall Street—where every job creates two others across the five boroughs—will also result in smaller-than-forecast job losses throughout New York City.
Budget officials as recently as June had predicted that 47,000 securities jobs would disappear before the recession’s end, but as a result of rapid improvement in the industry, Comptroller Thomas DiNapoli now believes losses “are unlikely to exceed 35,000.”
“Wall Street remains the engine that drives New York’s economy,” he said. “It’s encouraging that the industry is recovering faster than forecast.”
The comptroller did, however, warn that compensation crackdowns in Washington could restrict cash bonuses and that multibillion-dollar state and city budget gaps remain: “New York can’t rely on tax revenues from Wall Street to save the day.”
The securities industry, which has shed 28,300 jobs since a November 2007 peak, accounted for less than 5 percent of jobs in the city in 2008 but 24 percent of all wages paid last year. Wall Street directly and indirectly accounted for three-quarters of the 106,300 jobs lost in the city between September 2008 and September 2009, the comptroller’s report says.
His report comes on the heels of news from Mayor Michael Bloomberg that revenue through October is $680 million above projections for the current fiscal year.
“Things are looking better than at the time the budget passed,” a spokesman for the mayor said. “And that’s a good sign for our next budget.”
The four largest investment firms headquartered in the city for which there are data—Goldman Sachs Group Inc., Merrill Lynch, Morgan Stanley and JPMorgan Chase Investment Bank—earned $26.6 billion in the first three quarters of the year, compared with a $40.3 billion loss in 2008. And the broker/dealer operations of New York Stock Exchange member firms earned a record $35.7 billion in the first half of 2009—more than one and a half times the previous annual peak in 2000.
Based on current compensation trends, the comptroller predicts the bonus pool for the securities industry in the city could be higher than last year, when it totaled $18.4 billion. But new federal compensation rules could restrict the amount that is paid out in cash, meaning the city’s budget might not see an immediate benefit.
Experts attributed Wall Street’s changing fortunes and the subsequent brighter employment forecasts to two factors:
• First, low interest rates through the Federal Reserve, which has allowed banks to borrow money at virtually no cost, have driven down the expense of doing business. For example, the Securities Industry and Financial Markets Association reports that interest expenses of its NYSE-listed member firms fell to $5 billion in the second quarter of 2009 from a high of $76.3 billion in the last quarter of 2007.
• Second, an expected tightening of financial services laws, which was factored into many job-loss forecasts, has not yet materialized.
“Everybody thought there was going to be all of this regulation,” said Doug Turetsky, chief of staff at the Independent Budget Office.
Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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