New York is accustomed to job losses on Wall Street. They come with just about every economic slump, and their impact is felt throughout the city.þþBut now, as the city braces for a big contraction in the financial sector as a result of the credit crisis and the collapse of Bear Stearns, the fallout could be worse than in the past.þþThe New York economy is more dependent than ever on high Wall Street incomes, which have jumped by more than half since 2001, to an average of $387,000, according to the city comptroller’s office.þþLast year, the finance industry was responsible for nearly a third of all wages earned in the city, the highest in modern times. And each Wall Street job supports three workers in other sectors.þþA great many of the 14,000 employees of Bear Stearns are expected to lose their jobs because of the firm’s cash shortage and its pending acquisition by JPMorgan Chase. As the credit crisis unfolds and other firms discover the depths of their losses related to bad loans, few expect the layoffs to stop there.þþ“Up to this point in New York City, the material result of the credit crunch hasn’t been felt as quickly as people were expecting,” said Marcia Van Wagner, deputy comptroller for the budget of New York City. “It took a while for the other shoe to drop.”þþIndeed, even though economists say this slowdown started in the financial sector, New York has felt little of its pain. For example, real estate prices have largely held steady in the metropolitan area even as they have plummeted in other regions.þþNow there are signs of nervousness, and not just among bankers and traders. Some prospective buyers in the pricey condominium market have put their plans on hold. Companies like SeamlessWeb, which delivers food to financial firms, are reconsidering plans to hire more staff. A newsstand operator across from the New York Stock Exchange greeted his customers last week by saying, “It will be O.K.”þþAnalysts are predicting wider cuts across the industry, even among workers who had nothing to do with mortgages. A UBS analyst, Glenn Schorr, said the major banks had already cut 5 to 10 percent of their work forces, and he said he expected them to make cuts on a similar scale again in the next few months.þþ“It’s fair to, unfortunately, expect another wave of cuts as they batten down the hatches,” said Mr. Schorr, who covers several major banks.þþSome New York-area residents are becoming more cautious with their spending decisions.þþLast month, Shai Shustik, a broker with Manhattan Residential, was helping a 27-year-old client find a $700,000 one-bedroom apartment on the East Side of Manhattan. But then the client suddenly put her search on hold. Her father, a banker, said he had lost too much money in the stock market to buy such an apartment for her.þþUntil two weeks ago, Mr. Shustik was also working with a Credit Suisse banker who wanted to spend up to $1.6 million for a one-bedroom apartment in the West Village or TriBeCa neighborhoods of Manhattan. The banker abruptly stopped his apartment search because he was too concerned about the stock market and his future bonus potential. þþLast Tuesday, a woman picking at her salad in Grand Central Terminal said her husband, who works at a competitor of Bear Stearns, feared the trouble would spread. þþ“He’s worried,” said the woman, Emilie Bosak, a stay-at-home mother. “Most people in finance are worried.”þþThat worry has been building since last summer, just after two hedge funds within Bear Stearns collapsed and the mortgage markets were beginning to freeze. Employment at securities firms in New York had rebounded since the 2001 recession and was nearing its all-time peak of 200,000 from before that downturn, according to the Securities Industry and Financial Markets Association, a trade group.þþSince August, the financial industry has gradually shed at least 20,000 jobs, mostly among those selling loans, those bundling loans into complex securities and those placing trading bets on the likelihood that borrowers would pay.þþNow the pace of job losses is increasing. Significant cuts at Bear Stearns are almost certain. Citigroup is in the process of cutting 10 percent of the work force in its investment bank, or 6,000 people. Lehman Brothers announced 1,400 layoffs two weeks ago.þþGoldman Sachs said in January that it would reduce its global work force by 5 percent. On Friday, The New York Post reported that the cuts would rise to 20 percent, which would bring the total cut to 6,400 jobs. A spokeswoman for Goldman had no comment on the report.þþ“There will be more cutbacks because basically the business is not there,” said Richard X. Bove, a managing director at Punk, Ziegel & Company, an investment firm.þþThe last time Wall Street had a similar contraction was after the technology bubble burst seven years ago. At that time, financial firms cut 60,000 jobs in the New York City area, or 1 in every 10 finance positions, according to Moody’s Economy.com.þþBut those cuts were rapid, and this downturn strikes some people as more similar to the slow bleeding that occurred on Wall Street from 1987 to 1993, when 100,000 people in the New York area — 15 percent of finance workers — lost their jobs, according to Economy.com.þþSo far, Economy.com is predicting about 25,000 job losses in the New York area, but that number may be revised as the full impact of Wall Street’s credit troubles becomes clear, said Marisa Di Natale, a senior economist at Economy.com.þþThe firm’s chief economist, Mark Zandi, said of the current round of cuts: “It won’t be the same kind of job loss. Back in ’01 or ’91, it was a much larger share of the back-office jobs. But in terms of compensation, the impact could be just as significant. One hedge fund job lost today is worth 10 back-office jobs in the last downturn.”þþIn New York and surrounding counties, for example, financial workers accounted for 29 percent of all money earned and only 11 percent of jobs in 2006. That is up significantly from 1990, when the finance industry accounted for 19 percent of wages and 12 percent of jobs, according to an analysis by Economy.com.þþThat increase is related to an unprecedented rise in bonuses over the last four years and also to the elimination of some lower-paying jobs because of outsourcing and computer improvements.þþSome New Yorkers said their neighbors seemed to be in denial. þþ“I was at a benefit last week, and a major well-known chief executive told me that ‘Everything will be just fine. People will start buying houses again,’ ” said David Patrick Columbia, who runs the New York Social Diary, a Web site that chronicles Manhattan social life. “Another one blamed everything on the media. He went on about how the media is creating a recession.”þþTo be sure, it is not clear how prolonged the downturn in the economy will be or where its effects will be felt the most. Historically, most recessions have hit the manufacturing sector, for example, much harder than financial institutions. This downturn is different, many economists say, because it was set off by troubles in the financial sector.þþThat distinction is evident among executive recruiters in the securities industry, some of whom say they received a barrage of résumés last week after the sale of Bear Stearns was announced. þþ“Bear was a shock to the market. No one could have fathomed a year ago that something like this would happen so fast,” said Michael Karp, chief executive of Options Group, a recruiter in New York. “So employees across the board are nervous.”þþAdam Zoia, managing partner at Glocap, another New York recruiter, said employers using his firm listed the same number of job openings in the first two months of this year as in the period a year earlier. But, he said, they filled 20 to 30 percent fewer of those positions because of uncertainty about the economy.þþLast week, after the Bear Stearns announcement, business school and college students called their institutions from spring break to ask if their finance jobs would be canceled. It remains unclear what will happen with many internships and job offers.þþAnxiety is also being felt among the businesses that cater to Wall Street and its high-income workers.þþJason Finger, president of the food delivery company SeamlessWeb, said he saw a clear drop in business this past week. Each order was just a bit smaller. þþ“It’s only on the margin,” Mr. Finger said. “The financial markets have been very unsettling for us.”þþHarry’s Cafe, a cavernous restaurant in the financial district, saw a 15 to 20 percent drop in business over the last two weeks, mostly at lunchtime. The nearby Delmonico’s steakhouse also was slow during lunch. The restaurants’ managers say people living in the new condominiums downtown have added some stability at dinnertime.þþAt Bistro Laurent Tourondel, or BLT, a sleek steakhouse on 57th Street and Park Avenue, Yann Le Morzellec, the assistant general manager, said: “A lot of the clients have the black Amex card, which shows to us they are pretty stable. I think a lot of them might be immune to what’s going on.”þþEric Bedoucha, the chef at Financier Patisserie, a downtown bakery, tracks the financial market by the types of cakes his customers buy. þþ“They buy a ‘Good luck!’ cake for when someone is fired and ‘Welcome to our team!’ when someone is hired,” Mr. Bedoucha said. þþHe saw lots of job-loss cakes in November but has not seen many since then. Still, the bakery opened in 2002, after the last bubble had burst, so he does not know whether people will buy any type of cake if there are large-scale layoffs.þþ
Source: NY Times
