After three years of declines, Wall Streets bonus pool is up and traders are about to get paid.
Cha ching!
New York State Comptroller Thomas P. DiNapoli noted in his most recent report that the bonus pool for Wall Street employees rose 2% to $23.9 billion during the December-to-March bonus season.
The average bonus paid to securities industry employees in New York City increased 1% to $138,210 in 2016 as pretax profits for broker/dealer operations increased 21% to $17.3 billion. It is the first increase in profits following three years of consecutive declines. In the report, DiNapoli said that profits were driven by cutting costs and lowering non-compensation expenses, which includes the cost of legal settlements.
Wall Street profits bounced back strongly in 2016. Lower costs more than made up for the continued decline in revenues, Mr. DiNapoli said in the news release. Bonuses were up only slightly in New York City as the industry held the line on compensation. The jump in profitability is good news since the industry generates a significant amount of tax revenue for both the state and city budgets.
Employment on Wall Street grew 2.2% in 2016 to 177,000 jobs on average, with 3,800 jobs added last year vs. 2,800 in 2015. It is the highest employment on Wall Street since the 2008 financial crisis and the third consecutive year of job growth.
Despite job gains, the securities industry in New York City is 6 percent smaller than in 2007, while the rest of the private sector has grown by 20 percent, DiNapoli said. Nonetheless, the industry remains an important part of the citys economy. The industry accounts for less than 5 percent of the private sector jobs in the city, but generates more than one-fifth of the private sector wages paid.
DiNapoli estimates that nearly 1 in 10 jobs in the city are either directly or indirectly associated with the securities industry.
Securities-related activities are a major source of revenue for the state and city, the report added. DiNapoli estimated that the securities industry accounted for 18.5 percent ($13.8 billion) of state tax collections in state fiscal year 2015-2016 and 7 percent ($3.7 billion) of city tax collections in city fiscal year 2016.
New York Citys budget had assumed that profits would reach $18 billion and that the bonus pool for securities industry employees in the city would increase by 2 percent. As a result, tax collections should be close to forecast.
In 2015, the most recent data available, the average salary including bonuses for Wall Street employees was $388,000, compared to $74,000 in the rest of the citys private sector. Data for 2016 are not yet available.
