Five years after the onset of the financial crisis, the securities industry in New York City remains in transition, state Comptroller Thomas DiNapoli said Tuesday in his annual Wall Street report on employment and earnings.
“How the industry negotiates this continued uncertainty could affect profitability and the finances of New York City and New York State,” the report said.
Securities industry revenues have been declining in recent years and profits, as measured by broker-dealer profits of New York Stock Exchange member firms, have been volatile. The industry posted record losses in 2007 and 2008, followed by the two most profitable years on record.
Strong profits of $12.6 billion occurred in the first half of 2011, but the second half resulted in $4.9 billion in losses as the European sovereign debt crisis deepened. By year’s end, profits were a disappointing $7.7 billion, DiNapoli said.
In the first half of 2012, the industry earned $10.5 billion and is on pace to earn more than $15 billion by year’s end unless adverse developments erode profitability as they did last year.
“No surprise, there’s a lot of uncertainty out there,” DiNapoli said after issuing his report. Variables, he said, include the European crisis and the Chinese economy.
Only a fraction of the new regulations the Dodd-Frank Act and the Basel III accord have taken effect and economic conditions, DiNapoli said, remain weak and vulnerable.
“Will this year end like last year? That’s a good question. What’s the new normal?,” DiNapoli said.
Unlike past economic recoveries, lower-paying industries other than securities are driving the current one, DiNapoli said. While New York City has regained more private sector jobs than it lost during the economic downturn – 179% -- the securities industry has regained only 28% of jobs lost during that time.
Among DiNapoli’s other major findings, securities industry employment has declined sharply in recent months and the total cash bonus pool will likely decline for the second straight year.
Despite that, almost half of Wall Street workers expect their bonuses to rise this year, the website eFinancialCareers reported this week. That survey revealed that those working for alternative-asset and long-only asset managers had high expectations, while they were lower among bulge brackets and broker-dealers.
DiNapoli’s report said total wages, a function of the number of jobs and the average salary of those jobs, reveals the economic impact of the securities industry.
“These jobs are important to the engine of the city’s economy. Tax revenue comes into play,” he said.
In 2011, according to the report, securities accounted for 23.2% of all private-sector wages in New York City, even though it represented only 5.3% of the city’s private-sector jobs. The average salary in the sector reached $362,950 in 2011, 5.3 times higher than the average in the rest of the private sector.
Despite the job losses, New York State has more securities industry jobs than any other state, and nearly 90% of those jobs are in New York City.
Moody’s Investors Service rates the state’s and city’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s rate them AA.