A new projection shows Wall Street’s meltdown could cost New York up to 40,000 private sector jobs and $3 billion in tax revenues over the next two years, two state officials said Thursday.
The revised numbers in the snapshot of worst case estimates was done Wednesday at the highest levels of government. They are worse than Gov. David Paterson’s estimate just Tuesday that the state would lose about $1 billion in revenue because of plummeting stock values and the need for federal bailouts of the financial sector.
Wall Street is a major economic force in New York state, generating one-fifth of the state’s revenues each year.
The officials, including one senior administration official, spoke to The Associated Press on the condition of anonymity because they weren’t authorized to comment on the fiscal analysis.
Both the revenue and job hits would be substantial. The total state budget including federal funds is about $120 billion. New York has about 7.25 million private-sector jobs, after losing 6,500 jobs, or 0.1 of 1 percent, in July. Employment had already declined in five of the first seven months of the year.
On Thursday, New York Assembly Speaker Sheldon Silver of Manhattan said a diminished Wall Street poses “monumental” economic challenges for the state, leading to lower wages and lower employment growth. He said that in late August, the state’s foundering financial sector had already shed more than 30,000 over the previous 10 months, citing an analysis by the Financial Times.
The new analysis includes the stock market drop, lost revenue from transactions and projected lost income tax revenue from Wall Street jobs.
State officials used the model of fiscal damage to New York after the Sept. 11, 2001, terrorist attacks. Then, Gov. George Pataki said it was the state’s worst financial hit since the Great Depression 70 years earlier.
There are still threats to the future of Wall Street fixtures. Three of its five major investment banks — Bear Stearns, Lehman Brothers and Merrill Lynch — have either gone out of business or been driven into the arms of other banks. The two remaining — Goldman Sachs Group Inc. and Morgan Stanley — were under siege.
The state officials caution that they are still trying to estimate how many jobs might remain in Manhattan.
“We’re in some serious times,” Paterson said Tuesday. “It’s going to get worse before it gets better.”
State Division of Budget spokesman Jeffrey Gordon wouldn’t confirm the numbers. He said officials will look to business tax and payroll tax figures expected in coming weeks to help estimate the damage.
For example, he said more than 27,000 employees have already lost or are at risk of losing their jobs because of decisions by major financial institutions to close or merge. But whether those jobs will be transferred or kept in some form may not be known for weeks.
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