Wall Street Job Losses Surge Despite Profits Near Record Highs

It’s the best of times and the worst of times for the securities industry in New York, which, despite near-record profits in the first half of the year, is on pace to lose nearly 50% more jobs in 2021 than it did in 2020, according to a report from the state comptroller’s office.

Pre-tax earnings for the securities industry during the first half of 2021 were $31 billion, up from $27.6 billion in the first half of 2020, according to State Comptroller Thomas DiNapoli’s annual report on Wall Street’s performance.

However, the report also forecast the industry to lose 4,900 jobs this year, compared with 3,600 jobs lost in 2020. Although the 3,600 jobs lost in 2020 represent a 2% decline—which is the smallest percentage among other major sectors in the city—it is the steepest annual decline for the securities industry since the Great Recession. By contrast, the city’s financial plan forecast a 5.1% gain in securities employment in 2021, or an addition of 9,200 jobs. The report attributed the concurrence of large profits and large job losses in the city to the combination of technological advances and the relocation of jobs.

“The securities industry’s strong profits have helped shore up tax revenues, and securities industry workers have been among the first to return to the office,” DiNapoli said in a statement. “Financial markets move in cycles, however, and profits will subside at some point. As we prepare for an eventual slowdown in Wall Street’s record activity, we need to ensure New York’s Main Street, and its other vital sectors, are also recovering.”

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The comptroller’s office measures securities industry performance by the pre-tax profits of the broker/dealer (B/D) operations of New York Stock Exchange (NYSE) member firms. It said there are approximately 125 member firms, down from more than 200 in 2007 before the global financial crisis.

The strong first-half profits were attributed to most of the same factors that resulted in last year’s robust profits, such as record-low interest rates that kept expenses down, strong trading volume, record earnings in subsectors such as global equities, and record revenue from underwriting and account supervision fees and investment advisory fees. Although third quarter results show continued strength, the report said there is a risk that the industry’s profit growth will slow as interest rates rise and federal monetary stimulus wanes.

The average salary for New York City securities industry employees in 2020, including bonuses, was $438,450, which was up 7.8% from a $406,854 average salary in 2019. And, since 2007, the industry’s average salary in New York has been the highest in the US, with the average salary nearly five times higher than the average in the rest of the private sector. In contrast, the average salary in the securities industry was only twice the average in the rest of the private sector in 1981. And the average bonuses paid to New York City securities industry workers grew by 10% to $184,000 in 2020.

Wall Street makes up just 5.2% of the city’s private-sector workforce; however, it made up 20% of all wages paid in the city last year and 55% of all private-sector bonus payments, according to the report. It also was responsible for 14% of all economic activity in the city, which was more than any other industry.

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Tags: Comptroller, Great Recession, New York, securities industry, Thomas P. DiNapoli, Wall Street

Many institutional investors believe electric cars holds value. Forty-one percent of Tesla shareholders are institutional investors.

Major pension funds including the New York State Common Retirement Fund, New York State Teachers’ Retirement System (NYSTRS), State of New Jersey Common Pension Fund, and Alaska Department of Revenue all have holdings in Tesla, according to their third quarter 2021 13F filings. The New York State Common Retirement Fund has the largest amount of holdings, with approximately $1.2 million invested in Tesla, followed by NYSTRS, which has approximately $740,000 invested. The Edinburgh-based fund manager Baillie Gifford has made $29 billion by investing heavily in Tesla beginning in 2013.

But the meme culture could also be catching on. In the past three days, the rental car company Avis has seen its stock price soar from $174.30 to a peak of $535.06, and then back down again to approximately $274 at market close on Thursday. This gigantic price fluctuation led many outlets to dub Avis a meme stock, even though the spike does not seem to have originated in Reddit or any other form of social media.

Instead, most believe the rise is due to comments that CEO Joe Ferraro made in a public earnings call discussion on Tuesday morning. When asked if Avis would continue to invest in electric vehicles, Ferraro responded that, “you’ll see us going forward be much more active in the electric scenarios as the situation develops over time.” Almost immediately afterward, Avis’ stock price began to skyrocket.

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Electric vehicles and related stocks seem to be prone to these sudden price surges. Tesla, the company with the largest share in the electric vehicle market, has seen its stock price shoot up more than 1,000% in the past two years. However, this dramatic increase has come at a cost. Tesla has a price-to-earnings (P/E) ratio of 401.67 according to Yahoo Finance, which is more than 17 times the Dow Jones Industrial average P/E rating. The stock has also been quite volatile. One of its largest dips happened in early March, when it tanked by more than 20%.

For institutional investors looking to increase their environmental, social, and governance (ESG) holdings, this situation can be frustrating. On the one hand, electric vehicles are a promising technology with the potential to decrease carbon dioxide emissions by at least half over the course of a vehicle’s lifetime when compared with gasoline cars. Electric vehicles have tremendous potential to reduce global dependency on fossil fuels, and they may very well become the standard cars of the future—meaning there should be plenty of opportunity to profit. But, on the other hand, there’s instability and the potential overvaluation.

Elon Musk, the CEO of Tesla, is considered by many to be a figurehead of meme stock culture. His tweets about the cryptocurrency Dogecoin likely contributed to it surging more than 800% within 24 hours. Most infamously, he tweeted about Tesla’s price in 2018, which led to the US Securities and Exchange Commission (SEC) suing him.