Thompson: Wall St. Bonuses To Drop 50%

NEW YORK CITY-Comptroller William C. Thompson, Jr., on Thursday, revised upward his earlier estimate of the city’s job losses, and said Wall Street bonuses for 2008 will reach their lowest level in six years. Thompson made these projections while discussing his forthcoming report, “The State of New York City’s Economy and Finances,” at a breakfast briefing hosted by the Business and Labor Coalition of New York. The report will be issued on Dec. 15.

As a result of both factors–a loss of 170,000 jobs between July of this year and late 2010, and a 50%-plus decline in Wall Street bonuses–city tax revenues will shrink by 4.3% in fiscal 2009. Earlier this year, Thompson had forecast the city’s job loss during that time frame would reach 165,000. Last month, a report from state comptroller Thomas DiNapoli put the losses at 175,000 for the city and 225,000 for the metro area.

In an excerpt from the forthcoming report, Thompson wrote, “While the city’s labor and real estate markets outperformed those of the nation for most of 2008, the adversities experienced by its largest industry make this one of the grimmest economic periods for the city in many years. The problems originating in the subprime mortgage market, which quickly spread to other mortgage-backed assets and to credit markets worldwide, have taken an immense toll on the city’s financial industry.” Noting that the collapse or forced sale of major financial institutions coincided with a 40% dropoff in stock prices since the beginning of the year, he predicted that these events “will affect the city’s economic condition for years to come.”

Thompson’s report found that job growth in New York City continued well after the housing and financial crises had caused significant job losses across the country. In fact, while total private sector jobs were up 0.09% for the first ten months of ’08, more recently a negative trend has developed. The year-over-year increase in private payroll jobs had fallen to 5,300 by October, compared with more than 50,000 as January ‘08.

The slowdown has affected the real estate scene as well, wrote Thompson. “After three successive years in which new residential building permits in the city exceeded 30,000 units, permits crested at 17,490″ in June ’08, he wrote. “The June figure was inflated, however, by developers seeking to qualify for 421a tax exemption benefits before new rules took effect, and in the third quarter permits averaged only 1,382 per month. It is likely that many of the permits for construction of new units will be put on hold given the downturn in the local economy. In addition, the absorption of the already completed units will challenge the market during the next several years.”

As for office, Thompson noted that the vacancy rate hit a low of 5.3% in Q2 ’07, “but has trended upward since that time. The vacancy rate reached 7.4% in Q3 ‘08, and for the first time in almost eight years the Midtown vacancy rate–7.8%–surpassed that of Downtown–7.3%. More than 6.7 million square feet of space was placed in the market in the third quarter, of which over four million square feet were in Midtown. Despite the rise in vacancy rates, asking rents continued to increase.”

At the BALCONY breakfast, Thompson said that with significant steps now being taken by the Federal Reserve and US Treasury to stabilize the housing market–coupled with a large fiscal stimulus package–there is hope that the recession will reach its trough by the spring of 2009. “We expect the nation’s real economic growth will be significantly negative in the fourth quarter of 2008 and the first two quarters of 2009, with positive, slow, growth possibly resuming in the third quarter of 2009,” he said.

Even so, Thompson called on the federal government to do more to help the economy rebound, and lauded the public works package proposed by President-elect Barack Obama as a way to fix the city’s infrastructure while providing jobs. In particular, he urged forward movement on the proposed Moynihan Station plan, stalled repeatedly since the late Sen. Daniel Patrick Moynihan first proposed it in the 1990s. “Financing from the federal stimulus package could help make that plan a reality while employing thousands and improving one of New York’s critical transit hubs.”