Wall Street, the lifeblood of New York City’s economy, could lose over 36,000 jobs because the financial credit crisis has rocked markets and stunned the U.S. economy, estimated James Brown, a labor market analyst with New York state’s labor department.
“History suggests it’s going to be something of that magnitude,” Brown told Reuters, noting Wall Street employment peaked at 200,300 in December 2000, nine months before the September 11, 2001 air attacks.
Losing one in five jobs on Wall Street could have dire consequences for the city’s economy.
Brown’s estimate was almost double the 20,000 job loss over the next two years that the city’s Independent Budget Office forecast in March.
At the end of last month, there were 182,300 people working at banks and brokerages, down more than 5,000 jobs since September. The smaller scope of the layoffs seen so far, however, likely reflects the lag between the end of severance payments and when job hunters file for unemployment benefits, Brown explained.
Unlike much of the nation, layoffs and falling profits on Wall Street pose a bigger risk to New York City’s economy than the housing-led downturn that threatens the nation, according to economists and Mayor Michael Bloomberg.
Bankers, brokers and traders earned an average salary and bonus of $340,312 a year in 2006, Brown said.
Wall Street’s total compensation amounts to almost 35 percent of all salaries and wages earned in the city, according to city officials. The taxes that Wall Street’s denizens and their employers pay mean the city’s finances mirror this sector’s roller-coaster cycles.
Real estate and the construction industry, however, remain a vital part of the city’s economy. As the credit crisis roils the lending market, economists are studying how the unwillingness or inability of banks to lend to developers could choke what has been until now an extraordinary construction boom in New York City.
“If you have a period in which employment is declining, they stop building office space, they stop building almost everything,” Brown said. “When we had multi-year slowdowns, in the early 1970s, the late 1980s and early 1990s, you saw dramatic slowdowns in construction.”
On Wednesday, the independent mayor warned that the city will not escape a national recession, but explained that the impact could differ:
“It may well hurt us later but greater when it comes to tax revenues because we’re very dependent on Wall Street.”
The city’s real estate market differs from much of the country because many New Yorkers live in their apartments instead of using them as a second residence and there is less speculative building, Bloomberg told reporters.
“I would think housing prices would come down slower and not as much as elsewhere,” he said. Though foreclosures are “tragic,” there are fewer here than in other areas, he added.
New York City still has too few apartments and this scarcity has kept rents strong though in some parts of the city they have slipped from near-record levels.
Though Manhattan apartments tend to be the most expensive of the five boroughs and fewer were sold in the first quarter, the median price shot up 13.2 percent to a record $945,276, according to the Prudential Douglas Elliman Manhattan Market Overview report.