The banks may have been bailed out — as Occupy Wall Street protesters are fond of chanting — but they are projected to earn lower profits, lose more jobs and dole out fewer sky-high bonuses for the remaining months of 2011, State Comptroller Tom DiNapoli says in a report out today.
A less-profitable Wall Street could mean trouble for the city and state’s fragile economies, which rely disproportionately on strong revenue from the financial sector. Tax collections from Wall Street are predicted to fall this year and may drop even more in 2012, the comptroller is predicting. And declining financial employment is likely to have ripple effects in the larger workforce, where one job lost on Wall Street results in almost two jobs lost in other industries in New York.
The report comes out at a time when anti-Wall Street protesters in New York and around the country are gaining momentum, a fact DiNapoli said is understandable given the market crash in 2008 and the economic recession that followed. But the comptroller also stressed that Wall Street needs to perform well in order for the state’s economy to improve, and while he sympathizes with the protesters, he also advocates for a healthy financial sector too.
“The high-risk, high-reward behavior, now we’re seeing the negative side of that,” DiNapoli told City Hall. “But I’d rather have a more stable, consistent level of profitability.”
Profits on Wall Street are projected to drop by a third from the previous year, barely reaching $18 billion by the end of 2011, DiNapoli says. Profits totaled $27.6 billion in 2010, which was $33.8 billion less than the record set in 2009, still the second-best year on record. Although profits spiked during the first half of 2011, expenses grew even faster.
Even though the banks rebounded in the second half of 2010, the comptroller is not anticipating a similar bounce this year after the release of advance reports of poor third-quarter performance at several major firms.
Likewise, the financial sector could lose nearly 10,000 more jobs by the end of 2012, in addition to 4,100 cutbacks already recorded this year. That could bring total job losses on Wall Street to 32,000 since January 2008.
Read the full post at The Capitol.