Posted by Doug Turetsky, January 18, 2012

IBO’s latest economic projections for the city anticipate the creation of nearly 39,000 jobs this year and about 50,000 in 2013. That’s good news for the city, which has already regained more than half the 135,000 jobs it lost in the recession. As the New York Times reports today on a U.S. Conference of Mayors’ study, New York City is doing better than many other cities, including Los Angeles and Chicago. In total, the U.S. has regained about a quarter of the jobs it lost.

But before the celebrating gets too loud, there’s another important consideration: the jobs we’re regaining don’t pay nearly as well as many of the ones we lost. While the city shed thousands of jobs in such high-paying sectors as Wall Street, where securities and commodities brokers earn average salaries of about $360,000 annually based on 2010 New York State Department of Labor data, we’re regaining jobs in industry sectors that pay just a fraction of that yearly wage.

The largest job gains projected by IBO are in education, health, and social services (excluding government jobs such as those in public schools or public hospitals). Together these sectors are expected to generate more than 33,000 jobs—or nearly 40 percent—of the city’s jobs growth over the next two years. But the industries expected to lead the growth in that sector have annual average wages below the citywide mean of $77,997 in 2010.

We anticipate that about 15,000 jobs will be created in health services, where salaries average roughly $54,900 a year (labor department salary estimates for these jobs include government positions). This industry includes occupations such as home health aides, medical assistants, and nurses. Another 10,000 jobs are expected in education, where the average salary is nearly $52,600. The education industry includes jobs ranging from child care workers to teachers to support staff. IBO also expects about 7,000 jobs will be gained in social assistance, where annual salaries average just $27,800. Social assistance includes occupations such as social workers, pre-school teachers, and recreation workers.

The average salary is even lower for the waiters, food prep workers, bartenders, dishwashers and other restaurant and bar staff whose occupations are included in the leisure and hospitality industry. We project food service and drinking places will add 15,000 of the 19,600 jobs expected to be gained in leisure and hospitality over the next two years. But the average annual salary for food and bar staff is just $24,050—less than a third of the citywide average—although tips help increase the take home pay.

The other industry we expect significant growth in is professional and business services, with a 19,200 increase in jobs over the next two years. This is a fairly well-paying industry as a whole and it lost a considerable number of jobs in the recession. About 11,000 of those jobs are projected to be in professional and technical services, which averaged $109,500 in annual salary in 2010. This portion of professional and business services includes occupations such as lawyers, accountants, and computer programmers.

But another 8,000 jobs to be gained in professional and business services are in administrative and support services, which doesn’t pay nearly as well, averaging $50,400 a year. The administrative and support services include jobs such as telemarketers, secretaries, and security guards.

The growth in comparatively lower paying jobs is better than the alternative—job losses. But lower paying jobs don’t give as big a boost as higher paying ones to the local economy and the city’s tax revenue. And that means less relief for a city budget already straining to keep up with the demand for public services.

Posted by Theresa Devine, July 30, 2010

In terms of job losses, New York City has fared much better than the nation in the last two years, and while the city’s unemployment rate has climbed, it has stayed close to the national unemployment rate. But there is one labor market indicator where New York City is doing worse than the country as a whole. The city’s long-term unemployment rate has shot up and consistently stayed above the nation’s, even as the national level of long-term unemployment has reached record highs.

Since the recent recession began, New York City’s unemployment rate (the share of the labor force not employed and looking for work) has tracked the national unemployment rate quite closely. From late 2007 to early 2009, the city’s unemployment rate was lower than the national unemployment rate, but the differences were no more than one-half a percentage point. From mid-2009 to early 2010, the pattern was reversed, but differences were still small. Both New York City and the nation had unemployment rates of 9.5 percent in June. This recent history is quite different from trends in prior recessions. New York City’s unemployment rate exceeded the national unemployment rate by an average of 3.5 percentage points in 1992 through 1993, and by an average of 2.8 percentage points in 2002 through 2003 (graph).

In contrast, the city’s incidence of long-term unemployment has exceeded the nation’s since 1989. New York City’s long-term unemployment rate (defined as the share of the labor force continuously unemployed for a half year or more) averaged 3.7 percent in 2009, the highest annual rate in the three decades for which we have data. The next highest annual average was 3.2 percent for 1992 and again for 1994. The city’s average long-term unemployment rate far exceeded the national average rate of 2.9 percent last year, which itself was far above its past high of 2.3 percent in 1983 (graph). In the first half of 2010, the national and local long-term unemployment rates both continued to climb sharply, with the U.S. average of 4.3 percent approaching the city average of 4.5 percent.

Last week the President signed into law legislation that extends federal emergency unemployment benefits. Many New Yorkers will benefit from this legislation, although the maximum duration of unemployment benefits for New York State residents will be 93 weeks, rather than a maximum of 99 weeks available in some other states. This is because New York State’s three-month average unemployment rate of 8.3 percent is just shy of the 8.5 percent federal threshold for the higher maximum.

Posted by David Belkin, June 8, 2010

Much has been made in recent months of last year’s record profits on Wall Street, the myriad ways (near-zero interest rates, bailouts, accounting rules changes) that government policy boosted those profits, and the seven or eight figure bonus packages that some Wall Street executives awarded themselves from those profits. There has been less said, however, about what happened to aggregate wages and salaries across the securities industry in New York City in 2009. Not only did wages fall, but the fall was the steepest in modern history—including the Great Depression.

Real average annual wages—including baseline salaries, cash bonuses, and exercised stock options—in the city’s securities industry slipped from $412,915 in 2007 to $396,370 in 2008, and then tumbled to $311,279 in 2009. (All amounts here and below are in constant 2009 dollars.) Adjusted for inflation, average wages in the securities industry plummeted 21.5 percent in 2009 and 24.6 percent over two years.

How could wages nose-dive in 2009 while Wall Street profits skyrocketed? First, most of last year’s wage decline reflected the industry’s crack-up in 2008: New York Stock Exchange member firms posting record losses, revenues dropping almost in half, and the year-end bonus pool shrinking in tandem—those bonus reductions were almost entirely felt in the first quarter of 2009. Real average bonus payments for the year as a whole fell 38.2 percent in 2009, on top of a 6.6 percent drop in 2008. It should be noted that bonuses measured here do not count grants of stock options; rather, reported wages include the gains realized on previously awarded options when they are exercised. But many options were “underwater” in 2009 due to the steep slide in the stock market, and this also depressed wages.

At the same time, while Wall Street profits surged in 2009, firm revenues did not recover. One result was continued pressure on employment—the securities industry lost 18,400 jobs in New York City in 2009, more than twice the decline over the course of 2008—and this appears to have weighed down baseline salary growth. The negative effects on options and salaries combined to reduce real average non-bonus wages in the city’s securities sector by 7.4 percent in 2009.

By comparison, securities industry job losses were much greater in the post-9/11 slump, but prior year bonuses and current year baseline salaries and option realizations never all fell at the same time. As a result, real average wages declined by “just” 10.1 percent in 2002 (and 11.2 percent over 2002 and 2003). Before that, there have been only three occasions since 1929 when real average securities wages fell by at least 10 percent in a year. None of these were during the Great Depression itself. That epoch was marked by drastically shrinking securities employment but surprisingly limited effect on industry average real wages; long-term stagnation rather than precipitous drops was the rule. There was much more securities wage volatility during the 1940s, a reflection of both wartime dislocations and two major bear markets. Trading controls may have also contributed to the steep postwar slide in real average wages, which included a nearly 18.0 percent decline in 1947. There was also a slightly larger than 10.0 percent drop in 1969—auguring the onset of the “Slow Crash” of the 1970s—and lastly a 13.7 percent dive in 1994, partly due to a crash in the bond markets that year, but mostly an artifact of a shift in the timing of bonus payments.

These episodes were all eclipsed in 2009. Also without modern precedent was the 29.4 percent plunge in real aggregate wages on Wall Street in 2009. Reflecting the combined effect of wage declines and layoffs, an estimated $21.4 billion in wages and salaries vanished in the city’s securities sector last year. Even in inflation-adjusted terms, the hit to aggregate industry wages last year was almost twice as large as in 2002.

But was the magnitude of last year’s wage drop actually just an effect of the prior years’ soaring—but ultimately insupportable—compensation growth? “What-goes-up…” may indeed be part of the explanation. However, workers on Wall Street saw their real average wages rise by $64,000 at the peak of the DotCom boom in 2000-2001, and then gave back 50 percent of those gains ($32,000) during the 2002-2003 slump. Over 2006-2007 real average wages grew by almost $100,400—and in 2008-2009, over 100 percent of those gains ($101,600) evaporated. Perhaps what has happened in the past two years can be viewed as a correction to the entire era.

What would a less lucrative but also less volatile securities industry, one that did not generate cycles of frenzied wage growth but also was less susceptible to catastrophic meltdowns of earnings, have meant for New York City’s economy? Just how lucrative and how volatile can be seen from the fact that from 1990-2009 there were nine years of double-digit percent increases in securities real average wages (including a high of +36.0 percent in 1992) and three of double-digit percent decreases (the worst was the -21.5 percent in 2009), all this yielding 5.4 percent annual average real growth over the whole period.

In the rest of the city’s financial sector (banking and insurance), by contrast, there were four years of double-digit real wage growth (the highest +14.5 percent in 1999) and no years of double digit decline (the worst, last year, was -6.8 percent), and annual average real growth over the period was 4.1 percent. Outside of finance, annual New York City private sector real wage growth averaged 1.6 percent, and never exceeded +6.2 percent (2000) or fell below -2.5 percent (2009) in any year.

So a securities industry that, from 1990 on, grew compensation at “merely” the robust pace of the rest of finance would have (all else being equal) delivered a much milder jolt to aggregate wages in 2009. But it would have also delivered much lower real aggregate wages—lower by $11.3 billion (22.0 percent) in 2009 and by an average of $15.7 billion (28.3 percent) per year over the past decade—than the securities wages actually paid in New York City.

This is just by way of illustration, but it does give something of the flavor of the challenge New York City could face adjusting to a securities industry that is unable to return to the kind of breakneck earnings growth it exhibited during the last 20 years—spectacular crashes and all. Just what kind of securities industry will emerge as Congress and regulators thrash out changes intended to protect borrowers, investors, and the broader economy is one of the great unknowns for both the city and the nation.