October 11, 2011
DiNapoli Forecasts Weaker Wall Street Outlook
Economic uncertainty due to the European sovereign debt crisis, a sluggish domestic economy, volatile stock markets, and regulatory changes are among the chief contributors to a weakened outlook for Wall Street profits, jobs and bonuses for 2011, according to an annual report on the securities industry released today by New York State Comptroller Thomas P. DiNapoli.
“The securities industry had a strong start to 2011, but its prospects have cooled considerably for the second half of this year,” DiNapoli said. “It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year. These developments will have a rippling effect through the economy and adversely impact State and City tax collections. As we know, when Wall Street slows, New York City and New York State’s budgets feel the impact and that is a concern.”
The economies and budgets of New York City and New York State are very dependent on the securities industry. According to the Office of the State Comptroller, last year securities-related activities accounted for 14 percent of New York State’s tax revenues and almost 7 percent of New York City’s. In addition, one in 8 jobs in New York City and 1 in 13 jobs in New York State are linked to the securities industry. Given the current weakness, tax collections are likely to fall short of City and State targets in their current fiscal years and may decline by more the following year.
DiNapoli’s analysis also found that:
“Excessive risk-taking on Wall Street was a major factor leading to the financial crisis and the recession,” DiNapoli said. “Regulatory changes that reduce risk and focus attention on long-term profitability rather than short-term gains will enhance stability. Despite the weaknesses we are seeing, the securities industry remains profitable and is a key component of the economies of New York City and New York State.”
Click here for a copy of the report.