Great news for all those who were hoping that New York's financial sector would shrink (not a hope I share). New York State comptroller Thomas DiNapoli reports:
"Cash bonuses were down in 2011, reflecting a difficult year on Wall
Street," DiNapoli said. "Profits were down sharply and securities firms
in New York City resumed downsizing in the second half of the year. The
securities industry, which is a critical component of the economies of
New York City and New York State, faces continued challenges as it works
through the fallout from the financial crisis and adjusts to regulatory
reforms."The Comptroller also estimates that profits for the broker/dealer
operations of New York Stock Exchange member firms, the traditional
measure of profitability for the securities industry, did not exceed
$13.5 billion in 2011, which would be less than half of the $27.6
billion earned in 2010. This would be the second year in a row that
profits dropped by more than half.While the industry had a strong first half with profits of $12.6
billion, it lost $3 billion during the third quarter. Underlying
profitability at the large firms was even weaker than reported because
profits were boosted by accounting adjustments. The industry earned a
record $61.4 billion in 2009 with the benefit of federal assistance
after losing a record total of $53.9 billion over the course of 2007 and
2008.While a number of large firms announced reductions in cash bonuses for
2011 (with several firms reporting reductions in the range of 20 to 30
percent), personal income tax collections indicate a smaller decline in
the overall cash bonus pool. This is likely due to the payment of
bonuses that had been deferred from earlier years. The increased use of
deferred compensation should create a pipeline of bonuses that will be
paid in future years, which will reduce volatility in industry tax
payments.DiNapoli's office releases an annual estimate of cash bonuses paid to
securities industry employees who work in New York City during the
traditional bonus season. Bonuses paid by New York City-based firms to
their employees located outside of the City (whether in domestic or
international locations) are not included. The Comptroller's estimate is
based on personal income tax trends and reflects cash bonuses and
deferred compensation for which taxes have been withheld. The estimate
does not include stock options or other forms of deferred compensation
that have not been realized.DiNapoli also reported that:
· The securities industry in New York City has resumed downsizing.
Between April 2011 and December 2011, the industry shed 4,300 jobs.
During the financial crisis, the industry had lost 28,000 jobs, of
which only 9,600 jobs had been recovered before losses resumed in
April 2011.· The average cash bonus declined by 13 percent to $121,150 in 2011.
The average bonus declined slightly less than the total cash bonus
pool because the pool was shared among fewer workers than in 2010.· Before the start of the financial crisis, business and personal
income tax collections from Wall Street related activities accounted
for up to 20 percent of New York State tax revenues, but that
contribution declined to 14 percent last year. Wall Street's
contribution to the city's tax collections has declined from 13
percent of city tax revenues to less than 7 percent.
