NEW YORK, July 27 (PTI): The economic slowdown in the United States is leading a major decline in pay and bonuses at Wall Street and has government officials worried as it could lead to a shortfall in city and State revenues, a media report said yesterday.
A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about USD18 billion less in pay and benefits in 2008 than in 2007, the New York Times said.
The cutting of payrolls is well under way, but the full effect will not be felt until the year's end, when bonuses for employees based in New York could shrink by USD10 billion or more, the paper added, citing city officials and compensation experts.
A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by USD6.5 billion, the paper said quoting the state comptroller's estimates.
City and state officials told the paper that the coming plunge in pay would have wrenching effects on the local and regional economies.
It would mean about USD10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services.
For many investment bankers and traders, year-end bonuses traditionally account for at least three-fourths of their income. But the downshifting of the Wall Street lifestyle has already begun, the Times said.
All told, Wall Street firms, which employ about 178,000 people in the city, have announced thousands of layoffs in the last year. One of the seven largest financial companies in the city, Bear Stearns, nearly failed in March before it was acquired by JP Morgan Chase and Company, the Times pointed out.
It is already clear that employees whose jobs survive the deep cutbacks will, as a group, take home much less money than they did last year or the year before.
The latest financial statements from the remaining six of the seven largest firms show that their compensation costs declined by a total of USD9.5 billion in the first half of this year, compared with the first half of 2007, the paper said.
These included JP Morgan Chase Incorporated, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers.
Analysts familiar with those companies were quoted as saying that the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of over USD18 billion for the full year. About half of that amount would have gone to people employed in New York City, they said.
