DiNapoli: Wall St. Profits on Pace to Beat 2016
First Half of the Year Profits Up 33 Percent
Securities industry profits totaled $12.3 billion in the first half of 2017, one-third higher than the $9.3 billion earned in the same period last year, putting Wall St. on pace for a second consecutive year of higher profits, according to a report recently released by New York State Comptroller Thomas P. DiNapoli.
"After a very successful first six months, Wall Street profits are on track to exceed last year's level, barring a major fourth quarter setback," DiNapoli said. "When Wall St. does well, state and city tax collections benefit. Nevertheless, attempts to boost profits by rolling back financial regulations and consumer protections could promote excessive risk-taking and volatility and put everyday Americans and the broader economy in harm's way."
Industry performance is traditionally measured by the pretax profits of the broker/dealer operations of New York Stock Exchange (NYSE) member firms. There are now about 130 firms, down from more than 200 before the financial crisis.
Last year, profits increased by 21 percent to $17.3 billion, marking the first increase after three years of consecutive declines. Profits were driven by cost cutting efforts and lower settlement costs stemming from the financial crisis.
In 2017, profits are being driven by higher revenues. Revenue from trading and underwriting rose 29 percent in the first half of the year on the strength of the financial markets, and revenue from wealth management was up 20 percent.
The securities industry added 11,100 jobs in New York City during the past three years, raising employment to 177,000 in 2016, the highest level since the financial crisis. Despite the job gains, there were 6 percent (11,900) fewer industry jobs than in 2007. In contrast, industry employment in the rest of the nation now exceeds the pre-crisis level.
After a weak start in 2017, job growth in the city has strengthened and is now on track for a small gain this year. As of Sept. 2017, there were 178,000 jobs in the securities industry in New York City.
The amount set aside by the industry for compensation in the first half of 2017 was almost 4 percent higher than one year earlier, which suggests bonuses could be higher than last year. DiNapoli will release his annual estimate of bonuses paid to industry employees in New York City in the spring. DiNapoli estimated that bonuses averaged $138,210 in 2016.
The average salary (including bonuses) in New York City's securities industry declined by 3 percent to $375,300 in 2016. Although the average salary has fallen by 19 percent since 2007 (after adjusting for inflation), it was still five times higher than the $74,800 average salary of the rest of the private sector in New York City. In 1981, the industry salary was twice the average of the rest of the private sector.
The securities industry is smaller today than before the financial crisis, but it remains an important part of New York City's economy and one of its most powerful economic engines. Although the industry represents less than 5 percent of all private sector jobs in the city, it was responsible for one-fifth of all private wages in 2016. DiNapoli estimates that 1 in 10 jobs in New York City and 1 in 16 jobs in New York state are either directly or indirectly associated with the securities industry.
DiNapoli's report also found:
- Almost one-quarter of the employees in the securities industry in New York City earned more than $250,000 in 2016, compared with one-tenth of the industry in the rest of the nation.
- Commuters living outside of the city accounted for 38 percent of the workers in the securities industry in 2016, almost twice the citywide share (22 percent). One-fifth of industry workers came from New Jersey, 6 percent from Long Island, 6 percent from Westchester, and 5 percent from Connecticut and other states.
- More than two-thirds of the city's securities industry workers were male and nearly two-thirds were white. More than one-fifth were Asian; 13 percent were Black or Hispanic. One-third were immigrants, the majority (more than three-quarters) from Asia and Europe.
- New York state has more than twice as many securities industry jobs as California, the second ranked state.
- Even though the industry was responsible for just 3 percent of the job gains in the city between 2013 and 2016, it was responsible for 15 percent of the increase in private sector wages during this period.
- The average salaries of securities industry jobs in the suburbs have been growing faster than in New York City. The average salary of securities industry jobs on Long Island in 2016 was $354,400, 18 percent higher than in 2007 even after taking inflation into account. In Westchester County, the average salary grew by 9 percent to reach $256,700.
- The securities industry accounted for 18 percent of state tax collections in state fiscal year 2016-17 and 6 percent of city tax collections in the city's fiscal year 2017.