Wall Street bonuses are expected to fall 22 percent from last year’s figures, thanks to rising inflation, rising interest rates and the war in Ukraine.
New York State Comptroller Thomas DiNapoli warned that the average payout of $516,000 to bankers in 2021 could fall by $113,642 this year, to an average of $403,137.
That’s more than five times the average salary of private sector workers.
Last year’s figure was a huge increase from the average payouts of $438,450 awarded in 2020. The United States economy roared back after COVID last year, but is now facing a seemingly inevitable recession, thanks to rising inflation, rising interest rates deployed to fight inflation and the war in Ukraine.
In Wall Street, investment banking costs fell from their 2021 records as mergers, acquisitions and IPOs dried up.
Average bonuses for bankers working in the securities industry is $257,500
“The last two years of gains and bonuses, fueled in part by the extraordinary federal response to the pandemic, have been unsustainable,” DiNapoli said.
A slump in bonuses spells bad news for NYC, which is garnering huge amounts of tax revenue from high-paying financial services firms in the Big Apple.
They account for 16 percent of New York’s economic output.
“As the sector slows in 2022, leading companies are reviewing staffing and office space needs, and a prolonged downturn could negatively impact the state and city treasury,” DiNapoli added.
Financiers can expect tighter times this year. Wall Street firms have set aside 6.5 percent less for compensation in the first half of 2022 as pre-tax profits halved to $13.5 billion, DiNapoli said.
Pre-tax profits are down 56 percent from the $31 billion earned in the same period last year.
In 2021, the industry handed out the largest bonuses to workers since 2006 as the economy recovered from the pandemic.
Wall Street bonuses in 2022 are expected to fall 22 percent or more from last year’s bumper payouts, according to a report by New York State Comptroller Thomas DiNapoli (pictured)
Average compensation rose to $516,560 per year for New York City securities industry workers in 2021, up from $438,450 in 2020, but the outlook for this year is pessimistic
Inflation, the war in Ukraine (pictured) and rising interest rates have weighed on the economic outlook
Goldman Sachs Group Inc and JPMorgan Chase paid bumper bonuses for 2021.
Goldman’s top-performing employees saw bonuses rise 40 to 50 percent, while JP Morgan increased bonuses for top-performing employees
.Morgan Stanley increased his average bonus by more than 20 percent. Overall, bonuses rose 20 to 25 percent on average in 2021, Johnson Associates estimated.
Several economic events this year resulted in much weaker market performance.
In late 2021, the emergence of the highly contagious Omicron strain of the coronavirus caused additional closures at manufacturing centers around the world, exacerbating the lingering supply chain problems that have accompanied the pandemic since its inception.
Meanwhile, Russia’s invasion of Ukraine at the end of February further exacerbated economic instability in Europe and put further pressure on global prices for a number of essential commodities, including energy and food.
In an already troubled global economy, these shocks pushed U.S. inflation to its 40-year high in June 2022, reaching 9.1 percent, according to the report. Politics.
In an effort to drive prices down by cooling consumer demand, the Federal Reserve has been aggressive in fighting high inflation, raising interest rates five times so far this year.
The Fed’s multiple rate hikes that began in March this year to ease decades-high inflation increased interest charges by $7.5 billion, tripling in the first half of 2021.
Gains so far in 2022 have returned to pre-pandemic ranges.
Market conditions remain challenging and third and fourth quarter earnings may decline further.
The Fed’s latest forecasts show that key interest rates will rise to 4.25 percent – 4.5 percent from the current range of 3 percent – 3.25 percent by the end of the year, raising interest expense liability for financial firms. further increases.
Meanwhile, Wall Street workers remain a major force in New York City, accounting for 16 percent of economic activity.
In 2020, one in 11 urban jobs was linked to the securities industry, although that had fallen from one in nine in 2019.
The decline was likely the result of fewer employees reporting into offices, which meant fewer customers for restaurants, shops, arts and entertainment venues.
The securities industry added 1,600 jobs for a total of 181,600 employees through September. Employment in the financial sector fell 1.9 percent in 2020 and 2021, compared to a 9.8 percent decline in the broader private sector.
Despite the bleak economic outlook, some major US banks have added staff this year, according to their third-quarter results.
It was a “surprise” to see banks adding a few jobs in recent months, DiNapoli told reporters on a conference call.
“We’re seeing that trend going the other way, but it’s too early to say that now.”
The auditor’s annual report on 2022 Wall Street bonuses will be released in March.