New York’s financial services sector may have recovered substantially from the huge losses of the financial crisis, but the securities industry isn’t out of the woods yet, and could shed an additional 10,000 jobs by 2012, according to a new report released Tuesday.
New York State Comptroller Thomas DiNapoli’s office reported that profits of securities firms in the New York Stock Exchange declined sharply during the second quarter of 2011, despite a $9.3 billion profit in the first quarter that comprised nearly half of the city’s $20 billion target. As a result, profits at securities firms likely won’t hit $18 billion for the entire year, so they’ll have to lay off more workers and issue lower cash bonuses. “Such developments would have a ripple effect through the rest of the local economy and hinder the recovery,” said the report.
“As we know, when Wall Street slows, New York City and New York State’s budgets feel the impact and that is a concern,” DiNapoli said in a statement.
The report points out, for example, that securities-related activities account for 14 percent of New York State’s revenues and nearly 7 percent of New York City’s tax revenues.
The securities industry is also strongly tied to employment in the state: 1 in 8 jobs in New York City and 1 in 13 jobs in New York State are related to securities.
The report says that while the New York securities industry added 9,900 jobs between January 2010 and April 2011, it lost 4,100 from April to August 2011, and because of decreased profits, even more jobs will be shed. In fact, the OSC estimates that the industry could lose an additional 10,000 jobs by the end of 2012, adding up to a total of 32,000 securities jobs lost since January of 2008.
Despite the decline in securities jobs, though, the take-home pay of workers in the industry isn’t exactly suffering. The average salary in the securities industry in 2010 grew by 16.1 percent to reach $361,330, which was 5.5 times higher than the average private sector salary of $66,120. (In 1981, the average securities industry salary was only twice as high as other private sector jobs.) In 2010, the securities industry accounted for 23.5 percent of all private sector wages despite accounting for only 5.3 percent of all private sector jobs.
As a whole, wages including bonuses paid to securities industry employees in New York City ballooned by 13.7 percent in 2010 to reach $58.4 billion, although that amount was still less than the record of $73.9 billion they were paid in 2007.
The report does say that decreased profits by securities firms and responses to regulatory changes will lead to smaller cash bonuses, though those losses are probably reflected in higher base pay. In February 2011, for example, cash bonuses for employees of New York City securities firms declined by 7.5 percent to $20.8 billion, and will likely continue to shrink.
Still, securities firms in New York State aren’t doing too badly overall. “Despite the weaknesses we are seeing, the securities industry remains profitable and is a key component of the economies of New York City and New York State,” DiNapoli said in a statement.