ALBANY – New York’s financial industry, an important source of revenues for the state budget, continues to shed jobs – a worrisome sign for the state’s economy and its own finances, state Comptroller Thomas DiNapoli warned Tuesday.
In his annual review of employment and earnings of the New York City-centered securities industry, DiNapoli said the sector lost 4,800 jobs between May and August. And bonuses paid to financial executives are expected to fall for the second straight year.
For the state, where one in 12 jobs are linked directly or indirectly to the financial industry, the eroding employment is contributing to a financial picture that shows the sector’s contributions to state tax collections are still off 30 percent from 2007 levels.
The securities industry now accounts for 14 percent of the state’s personal income and business tax receipts. That is down from a high five years ago of 20 percent – meaning the state has had to rely on other revenue raisers during the period to make up for the difference.
“The securities industry remains in transition and volatility and employment show that we have not reached the new normal,’’ DiNapoli said in a written statement in releasing his annual review.
While overall profits are expected to be up, the comptroller said the industry is “still reeling’’ from the financial crisis, coping with new federal regulations and an economy that is only very slowly recovering.
New York State government’s finances will be affected by “how the industry negotiates this continued uncertainty.’’
Overall, New York City – where one in seven jobs are linked directly or indirectly to the financial sector – has witnessed a net loss of 20,200 securities industry jobs since November 2007. Since then, the city lost 28,100 financial industry jobs, but gained back 7,900 of them during the recovery.
The industry is responsible for major collections in personal and business taxes, as well as capital gains taxes. The report noted that only a third of new federal rules imposed on the industry in the wake of the its controversial financial meltdown have yet to kick in – providing uncertainty for the sector beyond the broader economic bumps in the United States and Europe.
The comptroller’s report noted that securities industry jobs – which reach $363,000 in average salaries in New York City, or 5.3 times the average salary for all private-sector jobs – still are being lost and that, unlike during past recoveries, they are being replaced by jobs in lower-paid industries.
With the Dow Jones Industrial Average up about 10 percent so far this year, securities industry profits are expected to rise again, though the comptroller warned the market is still too volatile to predict how the year will end.
DiNapoli, who reports on the status of Wall Street bonuses each February, said he expects 2012 to end like 2011, with another down year for bonuses. That is more bad news for a state budget already projected to be in the red for 2013.
Because of the size of the securities industry in New York State – the sector has 2.5 times more jobs than second-place California – its financial health is of particular concern to budget drafters in Albany.
Simply put, the less money people make on Wall Street through salaries and bonuses, the less tax money Albany receives – meaning there is less to spend on major cost drivers like public schools and health care. As the DiNapoli report notes, the securities industry directly accounted for 5.3 percent of jobs in New York City, but it was responsible for 23.2 percent of all private-sector wages in 2011.
[Email: Tom Precious]