Main Street is reeling from mounting job losses and a grim outlook by Federal Reserve officials. Wall Street, on the other hand, may be enjoying a sharp rebound.
On Tuesday, a report by New York State Comptroller Thomas DiNapoli forecast that the number of vanishing finance jobs may be far lower than anticipated. Job cuts may not exceed 35,000 -- close to losses following the relatively minor recession of 2001, and much lower than the 47,000 officials had forecast while preparing New York City's budget in June. A year ago, many had forecast job losses exceeding 80,000.
"The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned," the report said. "Profitability is on track to exceed 2006 levels, which was a banner year for the industry."
Wall Street's fortunes stand in stark contrast to the labor market across the country; the 10.2% unemployment rate and 17.5% underemployment rate have soared past even bearish projections.
But brokerage houses of New York Stock Exchange member firms earned a record $35.7 billion in the first half of 2009, more than one and a half times the previous annual peak. Net revenue soared to $91.4 billion in the first half of the year, compared to $35 billion for the same period in 2008. New York City's four largest investment firms alone will make $22.6 billion through the end of September, after losing more than $40 billion a year ago.
The six largest bank holding companies, meanwhile, have reserved $113 billion for compensation, bonus pools, and stock options in the first nine months of the year.
DiNapoli said the brighter outlook for Wall Street's unemployment would help boost local government budgets. But the increased scrutiny and proposed limits on pay could cast uncertainty on tax revenue.
The report said that sharp upturn in profits has been "driven by low interest rates, which reduce the cost of doing business."
However, many have pointed out that that surviving banking giants like Goldman Sachs (GS) and Morgan Stanley (MS) have been given cheap funding because of taxpayer guarantees. And the demise of previous competitors, like Lehman Brothers and Bear Stearns, have let them corner lucrative business, like bond trading and issuing.
Wall Street job losses are surprisingly low, and firms eye record profits