NEW YORK CITY—With the fall of Lehman Brothers a decade in the rearview mirror, Wall Street continues to rake in the profits.
Securities industry pre-tax profits totaled $13.7 billion in the first half of 2018, an increase of 11% from the mid-point of 2017, according to a report released by New York State Comptroller Thomas P. DiNapoli.
In fact, the State Comptroller notes that Wall Street profits have risen since the end of the recession in 2009 and compensation in 2017 reached its highest point since the financial crisis.
“The momentum from last year's dramatic rise in profits has carried into 2018 and the industry is on track for another good year absent a setback later in the year,” DiNapoli says. “The securities industry is a major source of revenue for New York City and New York State, and is an important part of the city's economy. Ten years after Lehman Brothers' collapse it is clear that Wall Street does not need to return to the days of excessive risk-taking to enjoy rising profits.”
It appears the only significant data point that is lower is is the number of members of the New York Stock Exchange, currently at 120 firms, down from more than 200 before the financial crisis.
Beneficiaries of a bullish environment on Wall Street are securities industry professionals in the Financial District and elsewhere. The average salary (including bonuses) in New York City's securities industry increased by 13% to $422,500 in 2017, the highest since 2008 and the third-highest on record after adjusting for inflation, according to the report. The securities industry has the highest average salary of any industry in New York City, and accounted for 21% of all private sector wages in 2017 even though it accounted for less than 5% of employment.
The average salary in the securities industry on Long Island is nearly as high as in New York City. On Long Island, the average salary grew by 10% in 2017 to $389,000. The level was boosted by the presence of hedge-fund firms in Suffolk County, where the average salary was $599,800, the highest of any county in the nation, according to the State Comptroller's report.
The average salary in the securities industry in New York State increased by 12% in 2017 to $403,100, the highest since 2008 and the third-highest on record after adjusting for inflation. New York had the highest average securities industry salary of any state in the nation, reflecting the concentration of highly compensated employees, such as chief executive officers, in New York City.
In March 2018, DiNapoli estimated that the average bonus for securities industry employees in New York City increased by 17% to $184,200. After adjusting for inflation, it was the highest average bonus in a decade and the fourth-highest on record. Bonuses accounted for an estimated 40% of securities industry wages in 2017, a larger share than in any other major industry in New York City.
DiNapoli believes bonuses for securities industry employees in the city are likely to increase in 2018 for the third consecutive year based on compensation and profit trends in the first half of the year, although he cautioned it is too early to predict the bonus increase with certainty. The State Comptroller will release his office's 2018 bonus estimate in the spring of next year, based on tax withholding trends during the traditional bonus season.
The report estimates that tax collections attributable to the city's securities industry grew by 29% to $4.2 billion in New York City's FY2018, the highest level in a decade. The report attributes the growth to large increases in profits, bonuses, and capital gains in calendar 2017, which were boosted by recent changes in the federal tax code and a 2008 federal law that required repatriation of deferred compensation held overseas by the end of 2017. The industry accounted for 7% of city tax collections in CFY 2018.
Other notable data points from the State Comptroller's report include:
• New York State has more securities industry jobs (197,300 in 2017) than any other state in the nation, more than twice as many as second-ranked California and nearly three times higher than third-ranked Texas.
• New York City accounts for 90% of the securities industry jobs in the state.
• The securities industry added 10,600 jobs in the city between 2010 and 2017, bringing employment to 176,900. Despite these gains, the industry is still 6% smaller than before the financial crisis. The industry is on a pace to add 1,700 jobs in 2018 based on trends during the first half of the year.
• A total of 24% of securities industry workers in the city earned more than $250,000 in 2017, compared to 2.5% for the rest of the city's workforce.
• The disparity between average salaries in the city's securities industry and the rest of the private sector peaked in 2007, when it was six times higher. The gap narrowed after the financial crisis but has remained at least 5 to 1 since 2010, with a ratio of 5.5 to 1 in 2017.
Approximately 62% of the securities industry's employees live in New York City, while 38% commute, which is the highest share of commuters in any major industry.
• One-fifth of the workforce commuted from New Jersey, 6% from Long Island and 6% from Westchester County. More than half (55%) of the commuters from Connecticut and 38% from Westchester earned more than $250,000 per year.
• 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% were Black or Hispanic. One-third were immigrants—the majority from Asia and Europe.
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