The New York Times reports that New York city and state officials are worried about revenue losses due to pay cuts in the financial services industry, which they expect to be worse that the dotbomb/post 9/11 cutbacks.
Frankly, that downturn was mild compared to 1990-1991, the early 1980s, or the particularly nasty 1973-1975 contraction.
From the New York Times:
A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about $18 billion less in pay and benefits in 2008 than in 2007. The cutting of payrolls is well under way, but the full effect will not be felt until the year’s end, when bonuses for employees based in New York could shrink by $10 billion or more, according to city officials and compensation experts.
A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by $6.5 billion….
It would mean about $10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services….
“As long as I’ve been in the business, I think this is the worst,” said Vincent Nastri, whose Barclay-Rex tobacco shop down the street from the New York Stock Exchange sells cigars for as much as $35 apiece. “It’s been a little on the quiet side — a little shaky.”….
The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City….
Gesturing toward the luxury-goods stores lining Wall Street, John Russo, who has worked in commercial insurance for 35 years, said the steep fall in pay was bound to cause disruption in the financial district.
“Look across the street: BMW, Tumi luggage, apartments,” Mr. Russo said. “When things get bad, the moving trucks come.”: