Grygo is the chief content officer for FTF & FTF News.
Bonus season on Wall Street is here and it could be quite lucrative for some.
For achievements in 2021, bonuses for staff at actual Wall Street firms grew by 20 percent over bonuses for 2020, according to the New York State Comptroller’s office.
“The average bonus paid to employees in New York City’s securities industry for 2021 grew to $257,500, a 20 percent jump over the previous year’s record high,” according to annual estimates pulled together by the staff of Thomas P. DiNapoli, the comptroller for the Empire State.
But, as DiNapoli notes, the new record-high bonus may not be repeated a year from now because 2022 is facing great economic uncertainty caused by the Russian invasion of Ukraine, and the unpredictability of the ongoing COVID-19 variants that could extend the run of the pandemic. I would add that inflation rates, the employment rate, and interest rate levels add up to a difficult matrix that will take its toll in 2022.
And, for those curious about actual Wall Street salaries, “the average salary (including bonuses) in the city’s securities industry increased by 7.7 percent to $438,370 in 2020 (the latest annual data available), nearly five times higher than the average in the rest of the private sector ($92,315),” according to the comptroller’s office.
Thomas P. DiNapoli
The comptroller’s office gathers data about Wall Street firms to form an “annual estimate of bonuses paid during the traditional December through March bonus season to securities industry employees who work in New York City,” officials explain. “Bonuses paid by firms to their employees located outside of New York City, whether in domestic or international locations, are not included.”
The bonus estimates are “based on personal income tax withholding trends and includes cash bonuses paid for work performed in 2021 and bonuses deferred from prior years that have been cashed in. The estimate does not include stock options or other forms of deferred compensation for which taxes have not been withheld,” according to the comptroller’s office.
As for the bonuses being handed out now to Wall Street staff, they are “higher than the city’s most recent 15.7 percent growth projection and should help the city exceed its expected revenue from income taxes,” according to the comptroller’s office.
That’s good news for the New York City municipal government, which could be facing a deficit as high as $3 billion. It’s also good news that the actual 2021 bonus pool for Wall Street firms grew.
“While the average bonus rose 20 percent, the total 2021 bonus pool for New York City securities industry workers increased by 21 percent to $45 billion during the traditional December through March bonus season, up from $37.1 billion in 2020,” according to the comptroller’s office. “The 2020 bonus pool itself reflected 25 percent growth over the previous year, an increase that was historically unique in the wake of a pandemic-induced recession.”
Last year, though, appears to have been a strong one for Wall Street firms.
“Pretax profits through the first three quarters of 2021 for the broker/dealer operations of New York Stock Exchange member firms, the traditional measure of securities industry profits, increased by 19.6 percent to $44.9 billion,” according to the comptroller’s office.
“While fourth quarter results have not yet been released, they are expected to show continued profitability, which would represent the sixth consecutive year of growth in profits since 2015. The analysis suggests profits are likely to at least reach the second-highest level on record after 2009 (which saw $61.4 billion),” according to the comptroller’s office. Last year, profits rose because of low interest rates and a record IPO market that fueled lower interest expenses and record fees such as underwriting, account supervision, and investment advisory.
The staff rosters at Wall Street firms remained pretty much intact last year as “employment in the city’s securities industry was 180,000, 5 percent smaller than 2007 and 10 percent below its peak in 2000,” according to the comptroller’s report. “While New York remains the center of the nation’s securities industry, the total share of jobs has declined from 33 percent in 1990 to 18 percent in 2021.”
(Photo by Patrick Weissenberger for Unsplash.)
Overall, the securities industry constitutes “one-fifth of private-sector wages in New York City, despite comprising only 5 percent of private-sector employment,” and the comptroller’s office “estimates that 1 in 9 jobs in the city are either directly or indirectly associated with the securities industry.”
In fact, the comptroller’s report “estimates that the securities industry accounted for 18 percent ($14.9 billion) of state tax collections in state fiscal year (SFY) 2021 and 7 percent ($4.7 billion) of city tax collections in city fiscal year (CFY) 2021.”
While these results are upbeat for 2021, this year may prove to be more of a mixed bag.
“Wall Street’s soaring profits continued to beat expectations in 2021 and drove record bonuses,” says DiNapoli in a prepared statement. “But recent events are likely to drive near-term profitability and bonuses lower. Markets are turbulent as other sectors’ recovery remains sluggish and uneven, and Russia wages an inexcusable war on Ukraine’s freedom. In New York, we won’t get back to our pre-COVID economic strength until more New Yorkers and more sectors — retail, tourism, construction, the arts and others — enjoy similar success.”
Getting to a new normal of economic strength without unprovoked Russian invasions (or invasions of any kind), and an end to all of the ongoing wars across the globe would be very welcome. In addition, a new era without COVID-19-based economic calamities would cause a lot of people to breathe a sigh of relief and make them happy to embrace predictability.
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