Wall Street Bonuses Slide 9%; Will This Year Be Any Better?

Wall Street's average bonus last year: $146,200.

That's not as healthy as it might look. The figure is 9% lower than the 2014 average, marking the second straight yearly decline, according to data from the New York State Comptroller's Office.

The shrinking bonuses reflects an 11% drop in pre-tax profits for broker-dealer operations of New York Stock Exchange member firms, the traditional gauge of securities industry profitability, Thomas DiNapoli, the comptroller, said in a statement on Monday. Total pre-tax earnings were $14.3 billion.

The prospects for a rebound this year are slim, with sliding oil prices and slowing economic growth in China roiling markets worldwide and prompting speculation that the U.S. may fall into a recession. Those trends exacerbate the challenges to bank earnings following the 2008 financial crisis, including tougher regulations designed to prevent a recurrence and a slew of lawsuits.

While the cost of legal settlements appears to be easing, "ongoing weaknesses in the global economy and market volatility may dampen profits in 2016," DiNapoli said. "Both the state and city budgets depend heavily on the securities industry and lower profits could mean fewer industry jobs and less tax revenue."

Although the securities industry has shrunk since the financial crisis, it remains one of New York City's most powerful economic drivers, the comptroller's office said, accounting for 22% of all private-sector wages even though it represents just 5% of such jobs. 

Unlike recoveries from previous recessions, the securities industry hasn't propelled a rebound from the slump that ended in mid-2009, the office said. So far, it has accounted for less than 1% of new private-sector jobs, compared with 10% in the two previous cycles, DiNapoli said.

Still, the industry as a whole added jobs in New York last year, driving employment up 2.7% to 172,400, the highest since 2008, the comptroller's office said. The increase marked the first time since the financial crisis that firms added securities jobs two years in a row.

That's not the case at every company, however. Morgan Stanley (MS) said last year that it would cut the payroll in its bond-trading operations by 25%, blaming heightened regulation and a difficult operating environment that CEO James Gorman said required "radical actions."

The bank plans to reduce assets in that business from about $158 billion from July through September of 2015 to $110 billion.

Goldman Sachs (GS) , meanwhile has cut the number of employees in its bond-trading unit about 10% since the start of 2012, CEO Lloyd Blankfein said at a Credit Suisse conference last month.

"We remain committed" to the business, he said, but executives are "managing to the cycle." Since 2008, bond trading has been hampered by near-zero interest rates, which were increased last December for the first time in seven years, and then by just 25 basis points. Traders are now betting the Federal Reserve will raise rates only once this year, by the same amount.

Overall gains in securities jobs aren't necessarily mirrored in other banking operations, either. Many of the biggest banks have trimmed thousands of jobs as technological improvements enabled them to close some local branches.

JPMorgan Chase (JPM) , for instance, cut 12,000 positions in its consumer and community banking division last year as it shuttered almost 200 local offices, according to a January earnings report. That helped lower expenses by $700 million, the New York bank said.

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