Wall Street has been feeling emasculated; new numbers show there’s more to it than just whining. State comptroller Tom DiNapoli reports this morning that financial industry profits fell by a staggering 50 percent in 2011, cash bonuses dropped by 14 percent, and that the city shed 4,300 Wall Street jobs between April and the end of last year. DiNapoli is projecting that 2011 bonuses will total $19.7 billion — an average of $121,150 per employee.
What’s interesting and somewhat more hopeful is that the impact on New York budgets seems to have stabilized. During the boom years, Wall Street contributed 20 percent of New York state’s tax revenues and 13 percent of the city’s. For 2011, it made up about 14 percent of state revenue and 7 percent of the city’s tax collections. Yesterday, the Dow Jones finished above 13,000 for the first time since 2008, which is nice, but DiNapoli’s analysis makes it clear that the Wall Street generating those numbers is a very different place than it was four years ago. Among the changes that are still too hard to read is the shift toward deferred compensation, which may eventually fill some of the bonus shortfall.
Less cash from the financial industry means more public budget pain in the short run, but reducing government’s dependency on Wall Street was one aim of regulatory reforms like the Dodd-Frank Act. It seems to be working. Now all New York needs to do is find the industries that can pick up the slack.