New York City may lose as many as 165,000 jobs, including 35,000 in the financial industry, as the impact of the credit crisis spreads throughout the economy, Comptroller William Thompson's office said.
The forecast, contained in a column Thompson publishes on his Web site, represents an increase of 80,000 from the comptroller's most recent budget report in July, when he also predicted a loss of 25,000 financial services positions.
``Unfortunately, the events of the past several weeks portend a much more difficult economic climate for the city in the near future,'' wrote Frank Braconi, the comptroller's chief economist. The reason for his increased pessimism, he said, ``is the freezing up of credit markets, which will prevent consumers and businesses from making purchases and investments and will affect a broad range of industries.''
Wall Street, which accounted for 9 percent of New York's tax revenue in 2007, has been upended by the global financial crisis that led to the downfall of New York-based firms Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Bear Stearns Cos., and produced more than $600 billion in losses and writedowns worldwide.
``The financial rescue plan passed by Congress on Oct. 3 should help to stabilize financial markets, but it should not be seen as a panacea for our economic troubles,'' Braconi wrote, referring to the $700 billion bailout. ``It will not prevent a recession and there is no guarantee it will even prevent further convulsions in financial markets.''
Multiplier Effect
Economists at the Federal Reserve Bank of New York estimate that high-paying financial industry jobs have a multiplier effect. Each lost securities industry position may eradicate as many as three other positions in the city and state, according to New York state Comptroller Thomas DiNapoli, who has also predicted lost employment due to the financial crisis on the same order of magnitude as Thompson.
``It's a reflection of the reality that there is a national recession and that there is a restructuring of the financial sector in the city,'' said Doug Turetsky, a spokesman for New York's Independent Budget Office, a city government fiscal monitor. ``The two are combining to cost us a significant number of jobs.''
Losses among Wall Street firms will be so large this year, many of them won't have to pay taxes to the city for years, Mayor Michael Bloomberg has said. Last month, he ordered all city agencies to cut their budgets 2.5 percent this year and 5 percent next year, when he expects a budget deficit of at least $2.3 billion.
Revenue Decline
The comptroller's July estimate that New York City revenue would decline by about $2.4 billion, or 6.2 percent, compared with last year, will be revised in November to reflect the worsening economic conditions, Braconi wrote.
State officials anticipate a deficit for next year larger than the $5.4 billion they forecast in August. ``We can't wait for all the numbers to be there'' before undertaking spending cuts, Governor David Paterson, a Democrat, said.
The securities industry accounts for about 2.3 percent of all jobs in the state and 13.6 percent of all compensation. In the city, securities jobs are 5 percent of the total, and 23 percent of all wages.
Wall Street Ties
Thompson's projections also track predictions by New York state's budget department, which forecast a loss of 40,000 financial industry jobs.
``The economic health of New York City and the state as a whole is closely tied to the securities industry,'' said a Sept. 29 report by the state comptroller's office.
Fewer Wall Street jobs and smaller bonuses may produce a $950 million drop in state personal income-tax collections this year. Officials expect Wall Street bonuses will fall 43 percent to $27.5 billion, the least since 2004.
Next year ``is going to look a lot worse than 2008 for New York City,'' said Marisa DiNatale, a senior economist at Moody's economy.com in West Chester, Pennsylvania. ``We don't know how many will keep their jobs. Bonuses next year will be a fraction of what they were.''
Forecasts of economic storms have often been wildly inaccurate, Braconi warned. ``It is like trying to assess the damage from a hurricane when the eye of the storm is still overhead,'' he said.
Crisis Management
Thompson, a Democrat, has said he intends to run for mayor next year. Bloomberg, whose second term ends next year, is seeking a change in term-limits rules to allow him to make a bid for re-election.
The next two years may offer New Yorkers opportunity, as federal efforts to stimulate the economy create jobs in New York, said Carol O'Cleireacain, a senior economics fellow at the Brookings Institution in Washington who served as New York City budget director in 1993.
``The management of the crisis could act as a countervailing force that will employ people,'' O'Cleireacain said. ``There will always be a financial industry, and we will have investment banks going in paths they've never gone before. So we just don't know what the future will bring. It might not be as dire as some fear.''
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
1 comment:
I wanted to share with your readers more details about New York City Comptroller Bill Thompson’s economic analysis and forecast. In his office’s column, “The C-Note” - at www.comptroller.nyc.gov - we asked: “The question remains: how bad will it be for New York City? Forecasting the course of unpredictable events with a false certainty would be highly misleading—it is like trying to assess the damage from a hurricane when the eye of the storm is still overhead. We, are, however, continually revising our calculations in light of unfolding events. Our current forecast anticipates that as many as 165,000 private-sector jobs will be lost throughout the city’s economy over the next 24 months, which compares to a forecast of 85,000 jobs lost in the Comptroller’s most recent budget report, issued in July. We now believe that as many as 35,000 of those job losses may come in the financial services industry; our previous forecast was that the industry would contract by 25,000 jobs. The differences reflect the spreading of the economic troubles to other industry sectors as the nation slips into a general recession.”
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