Was it just last year that the New York Fed was warning that Wall Street stood “on the verge of a significant multiyear downturn in employment and in real earnings”?
Indeed, just over 12 months ago, the media — the FT included — were widely reporting that New York’s finance industry faced 80,000 or more job losses — quite a chunk from an industry estimated to employ a total of about 460,000 in New York, accounting for nearly 13 per cent of all jobs.
Now, Wall Street seems to be recovering faster than the national economy, notes Bloomberg on Tuesday, citing the latest annual report by New York state comptroller Thomas DiNapoli on the city’s securities industry.
Wall Street, he says, “remains the economic engine of both New York State and New York City”, and just to prove it, New York City’s four largest investment firms reaped profits of $22.6bn in the year through September 30 after losing more than $40.3bn last year, DiNapoli says.
More significantly, the report says job losses on Wall Street may not even exceed 35,000 — fewer than the 47,000 officials predicted when preparing the city’s June financial plan and far fewer than the 80,000-plus that some were predicting last year.
The report also notes that the six largest US bank holding companies set aside $112bn for compensation in the first nine months of 2009, and the bonus pool including stock options may be higher than last year.
Overall employment in the city’s financial industry fell by 8.9 per cent, or 42,000 jobs, in the past year from its November 2007 peak, compared with a 2.4 per cent decline, or 6,300 jobs, in the rest of the New York state, the report said.
But, as the comptroller’s office noted, Wall Street is not out of the woods yet. DiNapoli forecast that total job losses in New York City are unlikely to exceed 175,000, but are still hurting the local economy, although far less so than the city’s June 2009 forecast of 328,000 job losses. The report concludes:
“With severe job losses in the securities industry, Wall Street’s multiplier impact — which had enormous benefit to New York City’s economy during the economic expansion — worked in reverse, leading to job losses in the rest of the city’s economy… While the pace of Wall Street job losses has slowed considerably, the industry is not yet adding jobs on a sustained basis.”
The outlook could be worse, although the past year has certainly hurt the centre of America’s financial universe. The finance industry accounted for 20 per cent of New York state tax collections two years ago but will only yield about 15 per cent of total tax revenues in the financial year through March 31, the report stated, adding that in New York City, tax collections from Wall Street declined by about 40 per cent, or $1.9bn in the 2009 fiscal year that ended June 30.
Jobs and recovery: Discuss – FT Alphaville