Proactive Investors - Wall Street’s average bonus paid to securities employees dropped to $176,700 in 2022, a 26% decline from the previous year’s $240,400, according to New York State Comptroller Thomas DiNapoli’s annual estimate published Thursday.
Rising interest rates and fear of a recession led to significantly lower profits on Wall Street after a record year in 2021, the report said. As a result, bonuses returned to pre-pandemic levels, which will mean a decline in related income tax revenue, as anticipated by New York state and the city.
“Wall Street’s cash bonuses were expected to fall as several factors weighed on the securities’ industry profitability in 2022,” DiNapoli said. “A 26% decline brings the average bonus closer to what financial employees received prior to the pandemic.
“While lower bonuses affect income tax revenues for the state and city, our economic recovery does not depend solely on Wall Street,” he added. “Employment in leisure and hospitality, retail, restaurants and construction must continue to improve for the city and state to fully recover.”
DiNapoli’s report noted that the $33.7 billion bonus pool for 2022 was 21% lower than the previous year’s record of $42.7 billion — the largest drop since the Great Recession.
Deep declines in investment-banking fees
The fall to pre-pandemic levels mostly reverses the pool’s dramatic growth of 25% in 2020 and 15% in 2021. In 2022, Wall Street’s pre-tax profits fell 56% from the previous year due to deep declines in investment-banking fees, which were driven by the Federal Reserve’s interest-rate hikes, inflation, and Russia’s invasion of Ukraine, the report said.
The securities industry also has a significant impact on the city’s employment and the overall economy. In 2022, the sector employed about 190,800 people, the highest level in more than two decades, according to the report.
DiNapoli estimated that one in 11 jobs in the city is either directly or indirectly associated with the securities industry. While the city remains the capital of the US securities industry, he said its share of jobs has been declining over time as large firms have left the city. Sector employment in 2022 was 5.1% lower than in 2000, which represented the peak for securities employment in the city.
DiNapoli’s office releases an annual estimate of bonuses paid during the traditional December through March bonus season to securities industry employees who work in New York City. Bonuses paid by firms to their employees located outside of New York City, whether in domestic or international locations, are not included.