Wall Street profits surge in 1st half; creative economy contributes to NYC
Pretax profits in the securities industry hit $15.1 billion in the first six months of the year, up 11% from the same period in 2018, New York State Comptroller Thomas DiNapoli said on Friday.
But a slowdown in the global economy, trade tensions and political turbulence in Washington pose a threat to second half performance, the comptroller said in a report.
“Wall Street had a very profitable start in 2019, but uncertainties leave the second half of the year an open question,” DiNapoli said. “Volatile markets, global trade tensions, and political turbulence have sown economic anxiety and slowed global economic growth. My office will continue to keep a close eye on the securities industry as the year progresses, because what happens on Wall Street directly impacts the New York State and New York City economies.”
While net revenue rose in the first half of 2019, growth slowed to 2.4%, the report said, reflecting poor performance across equities, commodities and currencies. The securities industry also held down expense growth, which contributed to its profitability. Industry performance is traditionally measured by the pretax profits of the broker/dealer operations of New York Stock Exchange member firms. There are now about 120 member firms, down from the more than 200 before the Great Recession.
In 2018, there were 201,200 securities industry jobs in New York State, more than any other state in the nation. New York City accounted for 90% of the state’s securities industry jobs.
Employment in the securities industry in the city has increased in four of the past five years. However, job gains made in the early part of this year have been erased in recent months. As of September, the industry was on pace to lose close to 500 jobs for 2019. In 2018, the industry added 4,700 jobs.
The average salary for securities industry workers in the city, including bonuses, was $398,600 in 2018, down 5.6% from 2017. While down, it is still five times higher than the $79,800 average for the rest of the city’s private sector workers. In Manhattan, where 98% of the city’s securities jobs are located, the average salary was $403,400 in 2018 compared to an average of $122,000 in the other boroughs.
The average bonus for workers in securities industry was $153,700 in 2018, down 17% from a year earlier.
Although profitability increased in the first half of 2019, the amount set aside by companies for compensation including bonuses decreased by nearly 1% from the same period in 2018. Bonuses for 2019 are likely to be dictated by second-half revenues. The city’s budget assumes a 5% rise in bonuses, while the state will assume a smaller increase when its estimate is released early next year.
Wall Street is a large contributor to state and city finances, as the securities industry accounts for 17% of state collections and 6% of NYC tax collections. The securities industry was responsible for $13.2 billion of state tax collections in fiscal year 2018-2019.
Looking at demographics, immigrants made up nearly one-third of industry employees in the city in 2017, a slightly higher share than in 2007. Two-thirds of industry employees were white, 19% were Asian, 8% were Hispanic and 6% were African-American in 2017, with men comprising two-thirds of the workers.
Separately on Friday, New York City Comptroller Scott Stringer released a report showing that the creative sector contributes one out of every eight dollars of economic output toward the city’s economy.
The creative sector — comprised of industries from the performing arts to advertising, film and television to museums and art galleries, publishing, fashion, design and architecture, as well as thousands of independent artists, designers and others — employs 293,000 people, pays $30 billion annually in earnings, and spurs around $110 billion in economic activity, the report said.
“New York City is the creative capital of the world, and this report shows how the sector at the heart and soul of our city is also a pillar of our economy. From Broadway to local theater groups, film studios to artists’ studios, New York City’s creative sector is as much a core industry of our city as banking or real estate or law,” Stringer said. “We need to invest in strengthening the creative economy to support and recognize it as the engine of opportunity that it is.”
The 12% of creative sector jobs in New York City compares with 3% of all U.S. jobs and reaches as high as one in every 5 jobs nationally in the publishing, advertising, and fashion design industries.
Stringer made a series of recommendations aimed at strengthening the creative sector.
He wants to improve integration of the work done by city agencies by creating a deputy-mayor level task force to address the issue. These agencies include the Department of Cultural Affairs, the Mayor’s Office of Media and Entertainment, New York City Economic Development Corp. and NYC & Co.
He also wants to create cultural districts throughout the city modeled on existing districts such as Fifth Avenue’s Museum Mile, the Brooklyn Cultural District, and the Kaufman Arts District in Queens. These would be aimed at promoting neighborhood cultural resources as engines of local development. And Stringer want to improve the capital funding process for non-profit and cultural organizations and give incentives to allow for the conversion of industrial spaces into sites for creative sector uses.
“New York City is the crossroads of creativity," Stringer said. "This report provides a thoughtful and comprehensive roadmap for the city to fully realize the potential of the creative economy, expand opportunities to all New Yorkers, and build a thriving, diverse creative sector for the future.”