New York Expects ‘Sharp Fall’ in Wall Street Bonuses

Wall Street employees took home a hefty bonus last year, but New York is warning of a “sharp fall” in what workers can expect in 2020, as the coronavirus pandemic continues its chokehold on the industry.

Last year, Wall Street bonuses jumped 3% to $164,100 on average, according to annual estimates released Tuesday by New York State Comptroller Thomas DiNapoli. But that’s all changed with the walloping global markets are getting from the pandemic.

“The serious damage that COVID-19 is inflicting on financial markets and the global economy will sharply reduce industry profits this year,” DiNapoli said in a statement.

Last year, the securities industry profited when markets rallied 29%. But in the past month, stock indexes have plummeted 27%, which erased roughly three years’ worth of gains on the S&P 500. On Tuesday, the stock index rose more than 8% in response to Congress making progress on stimulus measures.

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But a decline in wages in the securities industry will have ripple effects in New York City, the comptroller argued. One-fifth of private sector wages in New York City come from the securities industry, despite it accounting for less than 5% of private sector employment. The securities industry also accounted for about 17%, or $13.2 billion, of tax collections for the state last year.

“The securities industry is integral to New York state’s and New York City’s economies, as a source of tax revenue and job creator in other industries,” the comptroller continued. “The state and the city need to prepare for the severe budgetary implications of the coronavirus crisis.”

Wall Street bonuses have previously declined in the middle of other financial crises. After the September 11 attacks, bonuses fell about 33% in 2001. In 2008, they fell about 47%.

Meanwhile, in Singapore, the sovereign wealth fund Temasek said last month that senior management would have their bonuses cut by 5% and 15%, depending on seniority. At the time, the fund said its employees would be “sharing gains and pains” along with its shareholders.

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Tags: bonus payment, Coronavirus, COVID-19, New York, securities industry, Thomas P. DiNapoli, Wall Street

A global recession will occur later this year, S&P Global forecasts, citing a drought in demand caused by mandatory stay-at-home provisions due to the novel coronavirus as a significant factor lending to the downturn.

“Restrictions on movement in Europe and the US are putting a severe dent in economy activity. COVID-19 is affecting all aspects of life,” the company wrote in its report. “We now forecast a global recession this year, with annual GDP rising 1% to 1.5%.”

S&P turned to the relatively mature Chinese market, which has been dealing with the impact of the virus for a bit longer than the rest of the world. According to recently reported economic data for January and February, the decline in Chinese industrial output was devastating compared to projections, underperforming projections by a magnitude of four.

“Economic data remains scarce, but the long-awaited initial figures from China for January and February were much worse than feared,” the company said, “four times the consensus forecast decline.”

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There’s a compendium of economic data that points to a recession, the company asserts, citing the VIX Index reaching its highest measures of volatility since the global financial crisis, credit spreads stretching to their widest ranges in nearly a decade, and an accelerating international demand for liquidity. This is on top of the equity market’s consistent double-digit free fall.

“All of this was made worse by the collapse in global oil prices, with prices falling below $30 per barrel as major producers failed to agree on supply cuts to support the market,” the company said.

Hedge fund magnate Ray Dalio recently predicted that US corporations will experience $4 trillion in economic losses related to the virus.

“What’s happening has not happened in our lifetime before,” Dalio told CNBC. “There’s a need for the government to spend more money, a lot more money.” A stimulus package estimated between $1 trillion to $2 trillion is being negotiated in Congress and has yet to garner clear bipartisan support.

IHS Markit, a London-based research firm, predicted that a global economic downturn will begin in the second quarter of 2020 and last through the end of the year, springing back in early 2021. By the end of the second quarter, the drop in GDP will total 5.4% annualized, the firm’s chief US economist Joel Prakken said.

S&P will continue to use China as a gauge in determining what the American economy can look like in the later stages of country’s grapple with COVID-19. “We now have China as a model for how the virus’ spread could stabilize and society could begin to return to normal. As China has shown, restrictions could be lifted more slowly than originally thought as public health concerns persist.” The company projects growth of 2.7% to 3.2% for China in 2020, with a muted second quarter and a recovery branching out in the second half.