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 today.
A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about $18 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 $10 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 $6.5 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 $10 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 JPMorgan Chase and Company, the Times pointed out.
