By: Jim Tawberg
Break out the bubbly: financial firms on Wall Street have notched their finest first half of a year since 2009.
Pretax profits in the securities industry reached $15.1 billion in the first six months of 2019, an 11 percent increase over the same period last year, and the best start in a decade. But a slowdown in the global economy and other factors pose threats to second half profits, according to State Comptroller Thomas P. DiNapoli’s annual report on Wall St.’s performance.
“Wall Street had a very profitable start in 2019, but uncertainties leave the second half of the year an open question,” DiNapoli said. “Volatile markets, global trade tensions, and political turbulence have sown economic anxiety and slowed global economic growth. My office will continue to keep a close eye on the securities industry as the year progresses, because what happens on Wall Street directly impacts the New York State and New York City economies.”
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 120 member firms, down from more than 200 before the financial crisis, his office reported.
While net revenue rose in the first half of 2019, growth slowed to 2.4 percent. The slowdown reportedly reflected poor performance across a range of activities including equities, commodities and currencies. The securities industry also held down the growth in expenses in the first half, which contributed to profitability.
Slower global economic growth, combined with trade tensions and political uncertainties, are casting a shadow over Wall St.’s second half and leave 2019’s year-end profits a guessing game. Although the securities industry has not yet reported on the third quarter, the nation’s largest bank-holding companies reported mixed results.
The average salary, including bonuses, for industry employees in New York City was $398,600 in 2018, a decline of 5.6 percent compared to 2017, but still five times more than the $79,800 average for the rest of the private sector in the city, DiNapoli’s report pointed out. Although that pay gap is slightly narrower than in 2007, when the securities industry paid six times the rest of the city’s private sector, it is still much wider than it was in 1981 when industry salaries were two times higher. Overall, the securities industry accounted for 20 percent of all private sector wages paid in New York City in 2018, even though its 181,300 jobs comprised less than 5 percent of private sector jobs in the city.
“Employment in the securities industry in New York City has increased in four of the past five years, but remains 4 percent (7,600 jobs) smaller than it was in 2007. In addition, job gains in the early part of 2019 have been erased in recent months. As of September 2019, the industry was on pace to lose almost 500 jobs in 2019. Last year, the industry added 4,700 jobs.”
