Mar 31, 2023 - Economy

Wall Street bonuses slumped last year, along with deal activity

Data: Office of the New York State Comptroller; Chart: Axios Visuals
Data: Office of the New York State Comptroller; Chart: Axios Visuals

Average bonuses on Wall Street last year suffered their steepest fall since 2008's market bloodbath — dropping 26% from the year before to an average of $176,700, according to the Office of the New York State Comptroller.

Why it matters: It's another headwind for New York City and New York State, where revenues are heavily reliant on personal income taxes, which in turn are driven by Wall Street pay packages.

  • The drop in Wall Street bonuses will translate into estimated declines of $457 million in state income tax revenue and $208 million in city revenues compared with 2021.
  • That slowdown will add to other budgetary pressures expected this year, like declining values for commercial office buildings, which are expected to cut NYC tax revenues by 1.3%, according to the city's Independent Budget Office.
  • Traditionally, Wall Street bonuses have also been important for the Manhattan-centric markets for high-end real estate and fine art.

Reality check: This isn't exactly a tragedy. The average bonus was still pretty high by historical standards.

  • And, at $176,700, it's more than twice as much as the median U.S. household was earning in 2021 ($70,784), the last year of available data.

Context: The drop in bonus payments makes sense, in light of last year's horrific performance for both the stock and bond markets.

  • The S&P 500 was down 19.4%, the worst year since 2008.
  • The Barclays U.S. Aggregate index — the best gauge of the overall bond market — fell 15%, which might be the worst year for U.S. bonds, well, ever.

How it works: When prices of stocks and bonds were plunging last year, companies decided it might not be the best time to sell investors their stocks and bonds.

  • When the issuance of stocks (down more than 90%) and bonds (down over 30%) dried up, so did some of the juicy pay that investment bankers reap for chaperoning offerings to market.

The bottom line: Don't worry, the bankers are going to be fine. But the dip in bonuses can impact even those who don't work on Wall Street.

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