NEW YORK (Reuters) - New York City’s economy will likely suffer should Lehman Brothers lay off more staff as the credit crisis unfolds.
Banks and brokerages have long anchored the city’s economy, in much the same way car-makers previously powered Detroit. The global credit crunch now in its 13th month has already spawned deficits in both the city and state budgets.
“I am very concerned about the situation at Lehman Brothers,” said Democratic City Comptroller William Thompson.
“The way in which it is resolved will affect its impact on New York City’s economy and tax revenues,” he added.
The credit crisis has taken a toll on the global financial industry, triggering hundreds of billions of dollars of losses, resulting in lower tax revenues for the city.
Lehman shares fell to nearly a 14-year low on Friday amid fears the investment bank might not find a buyer as it seeks to raise desperately needed capital.
Lehman, which had some 26,000 workers around the world at the end of August, has shed more than 2,000 since the end of February.
Experts also said Wall Street’s latest downward cycle could easily drag on.
“My sense is we’re probably getting close to halfway, just a little bit over that, but the dominoes keep falling,” said Ross DeVol, director of regional economics, for the Santa Monica, California-based Milken Institute.
Financial workers exert much influence on the city, with each of their positions creating as many four other jobs, because they are so highly paid, the nonpartisan think tank’s Devol explained.
On average, financial workers earned $157,000 a year last year, around three times the national average of $53,000, he said. The comparison is even more stark when just the salaries of bankers and brokers are examined. These individuals received an average of $340,312 in 2006, according to the state labor department.
Reporting by Joan Gralla; Editing by Diane Craft