Luck, not Bloomberg, dealt city's economy its hand
Chalk it up to fate. The only New York City mayor famous for striking it rich in the canyons of Wall Street will leave office with a securities industry that is not quite the golden goose it used to be.
Mayor Michael Bloomberg touts a more diverse five-borough economy that, he says, makes the city less dependent on Wall Street for its tax revenue and employment. For example, he took part Thursday in the opening of a tech company office in midtown Manhattan.
But in all his announcements, and in all the debates over economic issues among his would-be successors, it becomes easy to forget how little City Hall controls macroeconomic trends that can make or break a mayoralty. The hand dealt to any mayor involves some forces beyond his reach.
On Wall Street, as widely reported, recovery from the collapse of five years ago has proved slower than previous comebacks. This stubborn fact looms large for whoever succeeds Bloomberg next year.
This week, the city's Independent Budget Office issued a report citing "the somewhat diminished role of the extraordinarily high-paying securities sector in the local economy," despite a spike in profits last year.
Education, health, social services and the information sector have led city employment growth, the report notes, while Wall Street was still shedding jobs.
High-paid Wall Street jobs yield big income-tax revenue for the city and state via salaries and bonuses. "In the recent past," the budget office notes, "Wall Street has propelled total wage growth in the city far above its share of job increases."
In the boom period before the financial crisis, the securities sector accounted for about 10 percent of annual job gains but more than 57 percent of total wage growth. Yet for this year through 2017, the office projects Wall Street will account for 1 percent of job growth and just 19 percent of wage growth.
But even if circumstances are not what they were, James Parrott, deputy director of the Fiscal Policy Institute, a progressive-leaning think tank, urges against "shedding crocodile tears" for Wall Street.
"I don't think people should be writing off the financial sector," Parrott said. "It's not to the scale it was in 2007, but it's not shriveling up . . . This is not like 1975."
Parrott says cash bonuses still reached $20 billion overall last year. Also, with the Federal Reserve holding down interest rates, the securities sector, including hedge funds, stands to keep up its profits, he said.
It is on the other side of the ledger -- city spending on its own workforce -- where the Bloomberg administration's policies and actions stand most to constrain his successor's options. Terms of union contracts have expired in the past several years, with little funding set aside for retroactive pay hikes.
"Is the city in better fiscal shape today than when Mayor Bloomberg took office in January 2002?" the budget office asks. "Our projection of budget gaps would seem to say so. But the Bloomberg administration appears to be leaving the next mayor and City Council with a number of fiscal challenges -- the largest being the unresolved labor contracts."