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October 17, 2006

 

New York City Securities Industry Booming

New York City’s securities industry is adding jobs and profits are growing following a period of contraction, according to a report released today by State Comptroller Alan G. Hevesi. The industry, which is vitally important to New York City’s economic and financial well-being, paid $49 billion in wages and $2.1 billion in taxes to the City in 2005.

“Wall Street is recovering from the economic downturn that occurred in the beginning of the decade,” Hevesi said. “And, as we have seen in the past, when Wall Street does well, the City does well.”

New York’s securities industry has experienced strong growth in recent years and has contributed to the City’s recent economic expansion:

  • On an average annual basis, the securities industry added 9,500 jobs in the City between 2003 and 2005—three times faster than overall job creation. This represents a recovery of one-third of the jobs lost in the industry between 2000 and 2003. In addition, job growth accelerated during the first eight months of 2006.
  • Because employment grew faster in the securities industry than in the rest of the City’s economy, the industry’s share of total City employment averaged 4.9 percent during the first eight months of 2006 compared with an average of 4.6 percent during 2003.
  • Recent job growth in the City’s securities industry has outpaced the rest of the nation. While New York City’s share of U.S. securities employment fell by more than 12 percentage points between 1990 and 2003, it has been growing slowly ever since as job growth in the City’s securities industry outpaced the rest of the nation.
  • Total annual wages in the securities industry grew by 36 percent between 2003 and 2005—three times faster than wages in the rest of the City’s economy.
  • While the securities industry only accounted for 4.7 percent of the jobs in the City in 2005, it accounted for 20.6 percent of the wages.
  • In 2005, wages in the City’s securities industry accounted for almost 95 percent of the securities industry wages paid in New York State and 37 percent of the amount paid in the nation.
    Wall Street bonuses totaled a record $21.5 billion in 2005, growing to an average of $125,500.

“Wall Street remains a critically important component of the City’s economy,” Hevesi said. “While it accounts for only 5 percent of the jobs, the securities industry paid over 20 percent of the City’s wages.”

The report notes that average salaries in the City’s securities industry surged to a record $289,664 in 2005, a gain of almost 28 percent from 2003. The average securities salary is now 5.1 times the average salary paid in other industries—up from 2.5 times in 1990 and 4.3 times in 2003. Moreover, the average salary in the City’s securities industry is more than twice the amount paid in the securities industry elsewhere in the State or the nation as a whole.

Profits from traditional Wall Street activities, such as stock trading and issuances, are projected to increase by 58.5 percent in 2006 to $14.9 billion. In recent years, however, large financial firms have diversified their operations into activities and products that are not fully captured by this data. These activities, which include mergers and acquisitions, are contributing to strong industry profits.

Profits at the seven largest financial firms headquartered in New York City, which are highly diversified, increased by 42.5 percent in 2005—to reach a record $45 billion—and grew by another 34.6 percent during the first half of 2006. While smaller less diversified firms may not fare as well, the large firms, and perhaps the industry, are on track to set new records for revenues and profits.

The report notes that the securities industry, both directly and indirectly, accounts for one out of every seven jobs in the City. In addition, each new Wall Street job leads to the creation of an average of two additional jobs in the City and one in the suburbs. Thus, a total of 28,370 new City jobs can be attributed to job growth on Wall Street between 2003 and 2005—or 42 percent of the City’s total job gains during this period. Statewide, securities industry job growth in the City created more than 41,000 new jobs in the between 2003 and 2005. This accounts for 33.8 percent of the State’s total job gains during that period.

As the industry has grown, the City has become more reliant on taxes generated by Wall Street for revenues, a situation that could be harmful in the event of future market downturns. Industry tax payments have been a contributing factor behind recent record City budget surpluses. In recognition of its reliance on Wall Street, the City has worked to diversify its economy and encourage job and wage growth in other industries.

While the City’s securities industry is strong and has demonstrated resilience, it faces some significant challenges, including the move to electronic trading, new regulation, and an increasingly global economy. The New York Stock Exchange, for example, has taken several steps to address these challenges, such as its acquisition of Archipelago Holdings Inc, an all-electronic trading exchange, and development of the Hybrid Market, a combination of traditional and electronic trading. In addition, New York City’s human and financial capital and the ability of Wall Street firms to perform high value-added financial operations position the City well to maintain its standing as one of the financial capitals of the world.

“While the securities industry is evolving, I am confident that Wall Street will continue to transform itself and that New York City will retain its prominent position in world finance,” Hevesi said.

Click here for a copy of the report.

 

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