Wed October 10, 2012
Comptroller forecasts uncertain future for financial sector
Profits on Wall Street are going to be up this year, according to a new report from the State Comptroller, but are still below their pre-recession highs.
The report also finds fewer job losses in the securities industry, but still many economic uncertainties ahead.
State Comptroller Tom DiNapoli projects that the New York City based securities industry will earn $15 billion in 2012. That’s nearly double last year’s profits, but still below the rates in the boom years before the 2008 market crash.
DiNapoli says the stock market , as well as the nation’s economy faces numerous uncertainties, including the on going European debt crisis, and the so-called fiscal cliff in the federal budget, that the President and Congress have set up to occur at the end of this year, when they must make some tough spending and taxing decisions.
“Wall Street is still a business sector in transition,” DiNapoli said.
DiNapoli says fewer people on Wall Street lost their jobs than was expected, still there are 1200 fewer positions now than in 2011.
The average salary of those employed by the securities industry rose to around $363,000.
DiNapoli says hate it or love it, the hiring and firing on Wall Street has an impact on the overall economy. He says for every job created on Wall Street, two other jobs are created in New York City, and one job is created outside of the City.
“Over time that does have an impact on other sectors of the economy,” DiNapoli said.
The higher than average Wall Street salaries, as well as the annual cash bonuses, are taxed at a high rate in New York, and help to balance the state’s budget.
Before the recession, Wall Street revenues made up 20% of the state’s total tax collections. DiNapoli says the ongoing economic slump and continued downsizing in the securities industry means that Wall Street revenues account for just 14% of the budget now.
The Comptroller says in the past, it’s been Wall Street that has led the way in economic recoveries, providing more jobs at higher rates of pay, and circulating that money through the economy.
But he says this time; the recovery is being driven by other industries that offer lower rates of pay.
“It’s hard to predict what the new normal is going to be,” he said.
The Comptroller says he expects cash bonuses to be lower at year’s end as well. It’s the continuation of a trend that began after the 2008 crash, as profits have declined and more employees are offered stocks as a bonus instead of money.