Despite efforts by Mayor Michael Bloomberg and Gov. David Paterson to cut costs, the city and state may require a federal bailout to deal with gaping budget gaps, comptroller Thomas DiNapoli said.
“New York, like other states, may require federal assistance to navigate these uncharted waters,” the comptroller wrote in the report.
New York City comptroller William Thompson has predicted that the city will lose 165,000 jobs, so the latest forecast by DiNapoli is the bleakest offered so far. The Mayor’s Office of Management and Budget has predicted the city will lose 31,000 securities jobs and 147,000 jobs overall in the private sector.
Already, the city has shed 16,300 Wall Street jobs, the comptroller said. Those losses will mount and could total 38,000 by next October. An additional 10,000 jobs could be lost in banking, insurance and real estate, bringing total job loss in the city’s financial activities sector to 48,000.
The new report paints a grim picture of the securities industry. Broker/dealer operations of New York Stock Exchange member firms reported losses of $20.7 billion in the first half of 2008 and the comptroller projected a minimum loss of $25.5 billion for the year. And year-end bonuses could fall a minimum of 50 percent.
Since salaries on Wall Street are high—the $400,000 average in 2007 was nearly seven times the salary of non-financial jobs in the city— the economic impact of losses in the securities industry ripples through the economy. DiNapoli estimates each job on Wall Street results in two other jobs created in the city and one in the suburbs. As Wall Street contracts, the job losses will spread throughout the economy, with private sector job loss reaching 175,000 in the city and 225,000 statewide.
The high levels of compensation on Wall Street generate a disproportionate share of state and city tax revenues. Wall Street-related tax revenue could drop by $4.5 billion, or 38 percent, for the state and $2 billion, or more than 40 percent, for the city by 2010.
“Wall Street is the engine that drives the economies of the New York State and New York City, but the global credit crunch has slowed that engine down,” DiNapoli said in a statement. “This year is on pace to be one of the worst years ever.”
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