Wall Street Losses Seen Affecting City’s Economy

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The New York Sun

When Citigroup Inc. announced an estimated decline of 60% in third quarter profits yesterday, citing large losses because of the liquidity crisis, there was a feeling of déjà vu among market analysts.

They have been hearing the same thing from the other New York-based financial banks: Lehman Brothers, Bear Stearns, and Morgan Stanley were all hit by the credit crisis. The only bank to emerge unscathed is Goldman Sachs.

With so many banks posting large losses, analysts are predicting job cuts and fewer bonuses, which means New York’s economy is going to feel some pain.

“It’s going to have an effect in the real estate market, the service and entertainment industry, and everything in between,” the director of New York City’s Independent Budget Office, Doug Turetsky, said.

Because there are roughly four jobs in New York City that depend on each well-paid Wall Street job, any cuts in the financial sector would affect the job market as a whole, Mr. Turetsky added.

“If this credit crunch continues to build, there will be more losses on Wall Street, and the real risk is businesses deteriorating and having to cut jobs,” the president of outplacement consulting firm Challenger, Gray & Christmas, John Challenger, said.

In addition to job cuts, Wall Street bankers can expect their bonuses to be slashed by as much as 40% versus last year, according to a report by Options Group, which tracks hiring and paying trends in New York’s financial industry.

“If the economy were to experience negative growth, it is quite obvious that we could see job losses, and New York is not immune,” the chief market economist at New York’s Avalon Partners Inc., Peter Cardillo, said. “But chances of that are still slim, because the economy is still poised for slow growth.”

While several banks have been hard hit, the silver lining comes from Goldman Sachs, which employs 13,000 people in New York City. On September 20, the firm reported its net income rose 79% in the third quarter, to $2.85 billion.


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