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Wall Street Bonuses Set New Record In 2005

Wall Street bonuses will set a new record of $21.5 billion in 2005, surpassing the previous record of $19.5 billion set in 2000 during the peak of the last bull market, according to a forecast released today by State Comptroller Alan G. Hevesi. This translates into average bonuses of $125,500 — also a new record.

“The securities industry had a very good year during 2005. The industry paid record bonuses based on exceptional revenue growth and solid profits,” Hevesi said.

After a disappointing first half, profits for member firms of the New York Stock Exchange improved during the third quarter and industry reports suggest an even stronger fourth quarter. Although 2005 profits could be less than last year’s level, many bonuses are tied to industry revenues, which have been exceptionally strong this year. Profits have been held down by rising interest rates, which increased the cost of doing business.

Revenues at Wall Street firms grew by 44.5 percent through the first three quarters of 2005 — reaching the highest level since the stock market peaked in 2000. Merger and acquisition activity account for most of the surge in revenues, which is expected to be up 28 percent over last year’s level and to exceed $1 trillion for the first time since 2000. Given the surge in merger and acquisition activity, investment bankers received the largest increases and bonuses just like last year.

Wall Street profits and bonuses have a major impact on revenue collections New York State and New York City. According to the State Comptroller’s estimates, New York State will collect $1.5 billion in tax revenue and New York City will collect almost $500 million — a total of nearly $2 billion for State and City coffers, from those bonuses.

Wall Street is also adding jobs, which is having a broad beneficial impact because of the multiplier effect. An earlier report by the State Comptroller found that each new job created in the securities industry creates three additional jobs, two in New York City and another job in the suburbs. Employment in the securities industry in New York City totaled 174,000 jobs in November 2005, 8,700 more jobs than a year ago. New York City accounts for 91.1 percent of the industry’s jobs in New York State, and 21.1 percent of securities jobs in the nation.

“Wall Street continues to be critically important to the economies of both the City and the State, but we must also encourage growth in other industries with well-paying jobs,” Hevesi said.

• Bonuses paid by Wall Street firms grew by an estimated 15.5 percent in 2005 to reach a record level of $21.5 billion, compared with $18.6 billion in 2004 and the previous record of $19.5 billion in 2000.
• Bonuses averaged an estimated $125,500 in 2005, an increase of 10 percent compared with $114,300 in 2004.
• Average bonuses in 2005 will be more than $25,000 higher than bonuses paid in 2000 at the peak of the last Wall Street boom.
  

Click here for historical data on Wall Street Bonuses

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