Smaller Wall Street Bonuses, More Job Cuts: DiNapoli

Wall Street may give out smaller bonuses for the second straight year and shed almost 10,000 jobs by the end of 2012 as Europe’s debt crisis slows the economy, New York Comptroller Thomas DiNapoli said.

Member firms of the New York Stock Exchange earned $9.3 billion in the first quarter, about half of the $20 billion New York City projected they’d earn for all of 2011. Since then, profits have dropped sharply and are unlikely to reach $18 billion for the year, DiNapoli said in a report today.

“The securities industry had a strong start to 2011, but its prospects have cooled considerably for the second half,” DiNapoli said. “It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year.”

The Standard & Poor’s 500 Index is down about 5.5 percent this year after gaining 12.8 percent in 2010. Stocks retreated today on concern Europe’s debt crisis may worsen.

After adding 9,900 jobs between January 2010 and April 2011, the securities industry shed 4,100 positions through August and may lose another 10,000 by the end of 2012, DiNapoli said. Each job gained or lost in the industry creates or eliminates three other jobs in New York City and state, he said.

Salary Disparity

The biggest global banks are trimming jobs the fastest since 2008 as companies seek to improve profitability, regulators boost capital requirements and a weakening economy squeezes revenue. Firms have announced more than 120,000 cuts this year, while hiring in some markets or businesses, data compiled by Bloomberg Industries show.

Bank of America Corp. (BAC), the biggest U.S. lender by assets, said Sept. 12 it will eliminate 30,000 jobs in the next few years under a project to remove about $5 billion in annual costs. Goldman Sachs Group Inc. (GS) said in July that it will cut about 1,000 jobs after its second-quarter drop in trading revenue was bigger than analysts estimated.

More Wall Street finance professionals expect bonuses to fall than rise over the next three years, according to an eFinancialCareers.com survey released yesterday. About 80 percent of the 1,098 people who responded to the e-mailed query in the U.S. said they don’t expect bigger bonuses over the next three years, with 46 percent expecting them to shrink.

In 2010, the average salary in the securities industry rose 16.1 percent to $361,330, 5.5 times higher than the average private-industry salary, DiNapoli said. The industry accounted for 23.5 percent of all wages paid by businesses while making up 5.3 percent of jobs.

Tax Contribution

Wall Street contributed about 7 percent of city tax revenue in fiscal 2011, almost half of the prerecession level of 13 percent, according to DiNapoli. The comptroller said one in eight jobs in the city, and one in 13 in the state, is associated with Wall Street.

Shrinking bonuses and a smaller securities industry workforce threaten New York state’s and New York City’s tax haul, DiNapoli said.

“Given the current weakness, 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’s statement said.

The state’s budget deficit estimate for fiscal year 2013 is now $2.4 billion, up from a $2 billion gap projected earlier this year when the Legislature approved the 2012 budget, DiNapoli said on former Governor David Paterson’s daily talk show on NewsTalk Radio 710.

DiNapoli said he added the $400 million to the deficit “upon factoring in what’s happening on Wall Street.”

To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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