A new report from New York State comptroller Thomas DiNapoli says 10,000 Wall Street workers will lose their jobs by the end of next year due to lower earnings in the second half of 2011. Mr. DiNapoli said the bad times ahead on Wall Street will have major consequences for the entire Empire State.
“The securities industry had a strong start to 2011, but its prospects have cooled considerably for the second half of this year. It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year,” Mr. DiNapoli said.
Mr. DiNapoli’s annual report, “The Securities Industry in New York City,” forecasts that Wall Street profits are unlikely to reach $18 billion for 2011, one-third less than last year. Wall Street profits are already down 10.8 percent to $12.6 billion for the first six months of 2011. The 10,000 lost jobs between now and the end of 2012 are in addition to approximately 4,100 jobs that were already cut during the first eight months of 2011. Though compensation at Wall Street firms actually increased in the first half of this year, Mr. DiNapoli expects the all-important annual bonuses to shrink due to weaker earnings in the latter part of 2011.
The comptroller’s office attributes the grim Wall Street forecast to economic uncertainty caused by the European sovereign debt crisis, the slow domestic economy, volatile stock markets, and regulatory changes.
Mr. DiNapoli expects Wall Street’s woes to have a major impact on all New Yorkers.
“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,” Mr. DiNapoli said.
According to the report, one out of every eight jobs in New York City and one in 13 jobs statewide are linked to the securities industry. The State Comptroller’s Office also estimates each job lost in the securities industry leads to the loss of almost two additional jobs in other industries in New York City and the loss of another job elsewhere in New York State.
Though he has a grim outlook for the coming year on Wall Street, Mr. DiNapoli believes the situation in the securities industry can be improved with new regulations.
“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,” Mr. DiNapoli said.