Each Lost Wall Street Job Costs N.Y. 2 Other Jobs
New York City could lose two jobs for every one cut on Wall Street, while anecdotal evidence shows that both residential and commercial markets might finally be starting to cool, a new report said on Wednesday.
Capsizing financial and real estate markets could torpedo the city budget.
"Barring a Wall Street (and Main Street housing market) miracle, the city faces a potential deficit reaching 5 percent of city-funded spending this year or more," the Manhattan Institute's report said.
Next year, there could be an even bigger deficit of 7 percent to 12 percent, the nonprofit research group warned.
Wall Street companies can produce up to one-fifth of city tax revenues. These employers added 20,000 workers from 2003 to 2006, causing other firms to hire 40,000 employees, the report said. Until scorched by the summer mortgage meltdown, this sector seemed poised to match or top 2006's record bonuses.
But now banks and brokerages are slashing tens of thousands of jobs, and Mayor Michael Bloomberg, who had to close a $5 billion deficit when his first term began in 2002, might again have to raise taxes or cut spending, the report said.
"New York began fiscal year 2008 in the thrall of an unprecedented tax boom, one not seen even in the torrid mid-1980s," the report said.
It bashed the mayor for missing a chance to slash what it said he calls "uncontrollable costs" that consume half of the city-funded budget. Those expenses are Medicaid, pension and health benefits, and debt repayment.
"Bloomberg leaves a legacy to his successor: a projected 50 percent increase in outstanding debt," the report added.
Wall Street bonuses last year totaled $24 billion, giving the city an additional $500 million of tax revenue, according to the report by the Manhattan Institute, which says it supports "greater economic choice and individual responsibility."
The city's fiscal years start on July 1.
Bonanza from Big Spenders
Traders, bankers, and brokers are all quite well-paid, and their free-spending ways create so-called indirect jobs, in restaurants and shops, for example. Financial workers' lofty paychecks have driven apartment prices and rents much higher.
Their demand for apartments -- and their growing employers' need for more office space -- has also construction to skyrocket.
A Bloomberg spokesman had no immediate comment on the report.
The mayor, a former Republican turned independent, says he has worked hard to wean the city from its addiction to Wall Street's profits.
At an Economist conference on Tuesday, the two-term mayor estimated the city had about 500,000 manufacturing workers, some of whom have helped revive the Garment District.
Like many other U.S. clothing makers, New York firms for the past few decades have moved overseas, saying brutal cost competition forced them to turn to lower-paid workers.
Bloomberg said the city has transformed into a high-end design center, which offers stars, like Oscar de la Renta, the accomplished seamstresses needed for last-minute alterations.
The mayor also says he has safeguarded the city's financial health by prepaying debt and saving $2.5 billion for retired workers' medical care.
The Manhattan Institute, however, said his current budget hikes spending to 11.2 percent of personal income tax revenue -- the highest since the October 1987 stock market crash.
Still, personal income tax revenues have topped forecasts by about 6 percent so far this year, including an extra $51 million in September, said Marcia Van Wagner, a financial analyst for Democratic Comptroller William Thompson.
"The signs are pointing in multiple directions; our job here is to really keep an eye on the data and figure out fundamentally what is going on," she said, noting that September's corporate and real estate tax data will not be available until later this month.