Wall Street securities firms will emerge from the current recession in a down-sized mode, with few of the jobs cut replaced by 2013, even as the industry returns to profitability next year, a New York City fiscal monitor said in a gloomy report.
The city faces a decline in tax revenues of $2.5 billion in the current fiscal year, and a further $2.2 billion decline in the 2010 fiscal year, due to the Wall Street job cuts, a drooping real estate market and lower business taxes, the city's Independent Budget Office said in the report.
The projected decline for the current fiscal year ending on June 30 represents a 6.6% decline in tax revenues, according to the watchdog's report.
“This back-to-back decline - which follows a year, 2008, of essentially no tax revenue growth - would mark the first time in at least three decades that the city experienced consecutive years of falling tax revenues,” the Independent Budget Office said in the report.
The agency, which serves a similar role for the city as the Congressional Budget Office does for the federal government, forecast that Wall Street's future profitability will be hurt due to less reliance on leverage and tighter regulated.
The city's securities sector as a whole will lose $4.7 billion this year, and only earn $8 billion to $9 billion in each of the next three years, the report said.
Wall Street, which pays about 10% of the city's taxes, ran up $53.6 billion of net losses in the last two years, after near-record profits of $21 billion in 2006.
Even if the industry returns to profitability in 2010, Mayor Michael Bloomberg, an independent who is seeking a third term, faces $6.7 billion in deficits for the 2010 and 2011 fiscal years, the report said.
The fiscal monitor, however, trimmed its estimated job losses to 254,400 from 268,600 for the period from the last quarter of 2008 to the middle of 2010.
Employment in New York City peaked at 3.8 million in the third quarter of 2008, the report said. The latest forecast for job losses in the city is slightly higher than the loss of 228,500 jobs in the 2001 to 2003 recession - but smaller than the 377,500 reduction in jobs from 1989 to 1992.
By the third quarter of this year, New York City employers likely will have made three-quarters of the job cuts for the current recession, the report said. The financial sector as a whole is seen axing a total of 56,800 people through the first quarter of 2012.
More than half of the jobs lost will be by securities workers, with the sector's workforce falling by 17.2%, the report said. (Reuters)