July 2: New York’s biggest investment houses are shifting jobs out of the area and expanding in cheaper locales in the US, threatening the vast middle tier of positions that form the backbone of employment on Wall Street.
The shift comes even as banks consider deeper staff cuts here, which could undermine the state and city tax base long term.
“Places like New York or London will remain financial centres, but most of the players are taking a much harder look and asking whether they can move large numbers of jobs,” said James Malick, a partner at the Boston Consulting Group who advises banks on relocation. In addition to higher taxes in the New York region, employers face real estate and labour costs significantly above the national average.
Consultants say they have seen a sharp pickup in this trend, known as near-shoring, as opposed to offshoring overseas. Goldman Sachs, during a presentation to investors in late May, even boasted of the cost savings that relocating jobs can bring.
“Some functions need to stay in the US, but they don’t need to be in New York City or near the client,” Malick said. And with most investment giants facing anaemic revenue and more stringent regulation that cuts into trading revenues, relocation is more tempting than it was before the financial crisis.
Low-level jobs have already migrated to call centres and back offices overseas, while top-end traders and bankers are secure in the New York area, experts say. Instead, services like accounting, trading and legal support, and human resources and compliance are being shifted to places like Salt Lake City, North Carolina and Jacksonville, Florida.
Garry Douyon enjoyed his job helping process trades and working with clients and traders at RBS in Stamford, Connecticut, earning nearly $100,000 a year, but when the firm decided last fall to move his team to Salt Lake City with a salary of $60,000, he said he really didn’t have much of a choice.
“I didn’t even consider moving,” said Douyon, who founded a biofuels company, All-City Clean Energy, in Brooklyn with four partners. “I liked RBS but I have my roots here, I have a home, I have kids in school.” A few members of his team decided to go, he added, but most chose to stay in the New York area.
The potential shift has profound implications for New York’s tax base and economy because of Wall Street’s outsize financial profile. Last year, the industry contributed 14 per cent of New York state’s tax revenue.
After peaking at 213,000 in August 2007, securities industry jobs in the state fell more than 15 per cent in the wake of the financial crisis, according to the Bureau of Labour Statistics. Since then they have risen nearly 12,000, but at 191,200, employment is well below pre-crisis levels. By contrast, over the same period, Delaware gained 1,300 securities jobs while Arizona picked up 2,600.
The federal government does not specifically track securities jobs in Utah, North Carolina or Florida, popular locations for near-shoring. But data from firms illustrates the trend.
Since the end of 2009, Deutsche Bank’s work force in the New York area has fallen to 6,900 from 7,400 even as its staff in Jacksonville rose to 1,000 from 600. Credit Suisse’s staff in the New York region has dropped by 500 in the past four years, but the firm has added 450 positions in North Carolina’s Research Triangle, in the area of Raleigh, Cary, Durham and Chapel Hill. And last year, Bank of New York Mellon cut 350 jobs in New York City while hiring 150 people in Lake Mary, Florida. New York’s status as a financial capital is not likely to fade, and the state’s share of securities jobs in the US has held steady at about 24 per cent in recent years.
“Even as the securities industry goes through a difficult time, New York remains the financial capital of the world and I don’t see that changing anytime soon,” said Thomas P. DiNapoli, the New York state comptroller.
But regional offices perform more and more of the sophisticated work usually associated with Wall Street and nearby trading hubs like Jersey City and Stamford. This parallels a shift in some technology jobs away from Silicon Valley to Portland, Oregon, and cities in Texas, said Michael Shires, a professor at the School of Public Policy at Pepperdine, who prepares an annual ranking of the best cities for employment.