After a strong first half of the year, the state’s securities could take a downturn for the rest of 2013 because of the gridlock in Washington, Comptroller Thomas DiNapoli said in a report today.
New York government has a major stake in the success of Wall Street: 16 percent of its revenue comes from the New York City securities industry. It was 20 percent a few years ago, before the national recession in 2009.
DiNapoli said the turmoil in Washington over the debt ceiling and the federal budget could hurt Wall Street’s ongoing recovery from the recession.
“The political gridlock in Washington may take a bite out of the securities industry’s profits for the fourth quarter,” DiNapoli said. “Washington’s inability to resolve budget and fiscal issues is bad for business. Wall Street has undergone substantial changes since the financial crisis yet it remains profitable, contributing to the improved finances of New York City and New York state.”
DiNapoli said Wall Street rebounded from record losses in 2007 and 2008. It has had four years of profitability, with three of those posting the highest profits on record, largely because of low interest rates.
This year again started off strong, with profits of $10.1 billion that were on pace with 2012. But DiNapoli, who oversees one of the nation’s largest pension funds worth about $160 billion, said there appears to be a slowdown in recent months as interest rates increased and litigation costs grew.
On Saturday, the Justice Department reached a tentative $13 billion settlement JPMorgan Chase over the mortgage crisis that fueled the recession.
DiNapoli projected that profitability could be lower in the second half of the year, limiting overall earnings to $15 billion in 2013.
Jobs on Wall Street have declined over the past four years to 163,400 in August 2013, a 13.5 percent drop over that period.
As a result, New York’s City economic resurgence is not being fueled by the securities industry—which is the largest in the country. New York City has added 335,000 private-sector jobs since the recession, yet Wall Street only accounted for less than 1 percent of the growth, DiNapoli’s annual report found.
Still, DiNapoli predicted in February that the cash bonus pool for securities-industry employees in New York City rose by 8 percent to $20 billion.
The average salary, including bonuses, has remained steady at about $360,700 on Wall Street. That’s five times greater than the average salary in the city, which is $69,200, he said.