Job losses on Wall Street and declining tax revenues

New York banks and investment firms are doing very well. New York’s economy, not so much.

Usually the two travel in tandem. This bizarre ‘decoupling’ is yet another ominous sign for Gotham’s future and yet another headache for the incoming mayor.

Last week, the city’s biggest banks released their earnings – and almost everything was wonderful. JPMorgan Chase’s quarterly profit rose nearly a quarter to $ 11.7 billion. Citigroup made $ 4.6 billion, an increase of 48%. Morgan Stanley, Bank of America – everything went well.

You might think it’s because last year was such a disaster. But it was not. Thanks to record federal support for families and small businesses, people have stayed on top of their bills and kept spending. Thanks to cheap interest rates, companies continued to borrow money to merge with other companies. As State Comptroller Tom DiNapoli said of 2020, “Wall Street’s near record year has shattered all expectations.”

Still true. Investment banks are reaping record merger and acquisition fees, and Americans are paying again to borrow money.

But: if you just watched the one in New York works numbers, and not on the bank profit news, you wouldn’t know any of that.

In August, jobs in the city’s financial industry (excluding real estate) were down 5%, to 338,800, from August 2019. Jobs in commercial banking are down 7%, to 67,300 Investment-related jobs are also down 7% to 177,600.

If we weren’t distracted by huge double-digit percentage losses in other sectors of the city’s economy, like the arts and entertainment, these would be big numbers. Between 2007 and 2009, the investment industry lost 14 percent of its jobs, of course. But it was an existential crisis that either bankrupted many companies or made them wards of the state (and jobs never fully recovered).

Some of the latest job losses are due to the fact that banks, even with the profits flowing, are paying close attention to costs. Executives are worried about inflation, which could make it harder for companies to borrow money for mergers. There is a lot of talk about automating the work of junior investment bankers.

Jobs in the financial sector in New York are still down 5% from August 2019.
Jobs in the financial sector in New York are still down 5% from August 2019.
AP Photo / John Minchillo

But make no mistake: some of this job destruction is gain for other states. In Florida, financial jobs (again, not counting real estate) are up 6% since August 2019, to reach 422,000. This month another small investment firm, ARK, announced that ‘it would close its headquarters in New York and move to St. Petersburg, along with most of its dozens of employees.

Gotham boosters don’t see a problem here can howl at the loss of “dozens” of employees. But small businesses are more nimble and can move faster than giant behemoths like Citi and Chase.

New York is also seeing this change in its tax revenues. As the city council’s finance division quietly noted this month, “All progress in the labor market has hit a snag in the past two months.” Construction, retail and white-collar jobs “have all seen significant payroll declines” since June.

The local recovery may be stalled – with nearly 11% of Gotham’s 4 million pre-COVID private sector jobs still missing. “The city now faces a new long-term challenge from employers and workers who constantly choose remote work, allowing workers to leave the city or simply stay at home and consume less. It’s a potential shockwave, ”notes the council’s finance staff.

Keep in mind that the city has lowered its tax collection forecast this year as commercial real estate values ​​have plummeted thanks to too few people working in their offices. But tax collections don’t even meet those lowered estimates: For the first two months of this new fiscal year, according to the council, tax collections are down by more than $ 100 million from last year.

What does it mean when New York faces a $ 4.1 billion budget deficit next year, or 6% of total tax revenue, and with extraordinary federal help – both to citizens and to local governments – who is running out?

Our current mayor will not be there to find out. The Following the mayor, however, must already be worried. We used to worry about what happened when Wall Street collapsed; now we should be worried about having these woes when Wall Street does not have crushed.

Nicole Gelinas is the editor of the City Journal at the Manhattan Institute.

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