For all the talk of strong hiring in last year's on-again-off-again-on-again recovery, total U.S. securities industry employment rose only modestly in 2004, according to a report released today by the Securities Industry Association (SIA).
New hires lagged budget plans, with 4,300 new jobs bolstering industry employment rolls by only 2.5% nationally and 2.9% in New York. 'Some managers reportedly delayed filling new job slots, as the market rally faltered, after an uninterrupted advance that was just short of a year in length,' the report states.
New York Losing its Grip
But even as its hiring rolls swelled slightly, New York State's share of securities jobs dropped slightly, from 23.6 percent in January 2004 to 23.4 percent in January 2005. One out of every four securities industry jobs is now located in New York as compared to one out of every three a decade ago.
'The reason people were here prior to 9/11 was inertia. You stopped needing to be close to Wall Street in the 1970s,' says Alan Johnson, a compensation consultant with Johnson Associates in New York. He adds, 'It would be nice if firms would add tens of thousands of people again, but they won't because it's too expensive here.'
Indeed, the report noted that New York 'remains one of the nation's highest cost areas in which to live or conduct business.' It forecasted that further increases will help empty out office buildings and bring down all-important tax revenues.
'Although securities industry employees make up only 2.1 percent and 4.5 percent, respectively, of the workforce in New York State and New York City, wages paid to securities industry employees account for 8.5 percent and 19.2 percent, respectively, of adjusted gross income earned in the state and the city,' says Frank Fernandez, the SIA's chief economist.
Wall Street Working Harder
The SIA report cites evidence that Wall Street's impact on New York City tax revenues has grown larger over the past decade-from 12% of total wages to 19%-even as its share of the city's workforce shrank last year by .4 percent.
The SIA noted that 'the bulk of the industry's highest paid positions (investment bankers, traders, etc.) are in New York City as are many of the highest compensated CEO's and senior staff of almost every major securities firm. We estimate that this translates into NYC representing roughly 50% of national securities industry compensation.'
Not all of this is necessarily good news for the city. 'It's not really a diversified economy,' says Johnson. 'It's all services, and services are driven by financial services.' Besides leaving itself vulnerable to cyclical downturns, the city is bound to be affected by the leaner-and-meaner strategy many firms have adopted towards their 'human capital'.
'They work them like dogs,' observes Johnson.
To date, the New York State securities industry has recovered only 20% of the jobs lost in the industry downturn, the SIA says. 'Even though this recovery of 8,600 jobs from the trough is only 20% of the 42,200 lost, it is seen as a partial recovery, and one that we expect to extend across 2005.'