Wall Street could lose up to 10,000 jobs through the end of next year, amidst a backdrop of falling corporate profits and lower tax revenue for the city and state of New York, State Comptroller Thomas DiNapoli warned in a report on Tuesday.
DiNapoli particularly blamed the poor outlook on economic uncertainty due to the European sovereign debt crisis, a sluggish domestic economy, volatile stock markets, and regulatory changes.
“It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year,” DiNapoli said in a statement.
“These developments will have a rippling effect through the economy and adversely impact State and City tax collections. As we know, when Wall Street slows, New York City and New York State’s budgets feel the impact and that is a concern.”
The study cited that securities-related activities represented 14 percent of New York State’s tax revenues and nearly 7 percent of New York City’s.
Moreover, one in eight jobs in New York City and 1 in 13 jobs in New York State are connected to the securities industry.
“Given the current weakness, tax collections are likely to fall short of City and State targets in their current fiscal years and may decline by more the following year,” DiNapoli warned.
The comptroller’s analysis revealed that the member firms of the New York Stock Exchange earned $9.3 billion in the first quarter of 2011 (almost half of the City’s $20 billion target for the entire year), although profits fell sharply in the second quarter. The State Comptroller projects that profits are “unlikely” to reach $18 billion for all of 2011, which would be one-third less than in 2010.
However, the securities companies are also partially responsible themselves for the impending job cuts.
DiNapoli explained that “excessive risk-taking on Wall Street was a major factor leading to the financial crisis and the recession. Regulatory changes that reduce risk and focus attention on long-term profitability rather than short-term gains will enhance stability.”
Wall Street has been steadily losing jobs.
After creating 9,900 jobs between January 2010 and April 2011, the securities industry has lost 4,100 jobs through August 2011. “Job losses are likely to continue given declines in profitability and recent layoff announcements,” DiNapoli said. “[We estimate] that the securities industry could lose nearly 10,000 additional jobs by the end of 2012, which would bring total industry job losses to 32,000 since January 2008.”
Moreover, the Comptroller estimates that each job gained (or lost) in the securities industry leads to the creation (or loss) of almost two additional jobs in other industries in the New York City and another job elsewhere in New York State.