A stock-market crash would rip through New York City like a tornado and make the damage done by 1987’s Black Monday look minor, according to New York Magazine.
New York City is far more dependent on the fortunes of Wall Street than ever before, says the magazine, citing a little-noticed report by the Federal Reserve Bank of New York.
“Because Wall Street represents a much larger share of the city economy than at any time in the past, a significant downturn in the [financial] industry could result in more severe employment and income losses than those recorded in the 1970s or the early 1990s,” says one alarming section of the report.
Consider these facts: In 1987, 4.4 percent of the city’s workforce was employed by investment banks and brokerage firms, earning 11 percent of NYC’s total earnings.
By 1998 4.7 percent of city workers worked on Wall Street – but took home 19 percent of the city’s total pay.
The Federal Reserve report was actually released last summer; but in the middle of the stock market frenzy, no one paid it much attention.
Now that the stock market has endured a gut-wrenching week, the Fed Economists are hoping someone will dust if off.
For those who point out that the stock market has already recovered its losses, New York points out that it did in 1987 as well.
The city was sent spiraling into recession by layoffs at the jittery Wall Street firms, who were trying to protect themselves from further market gyrations.
The laid-off financial industry workers stopped buying apartments and country homes; stayed out of restaurants, and cut back on purchases of cars, jewelry and Broadway theater tickets. Their pullback brought the city’s economy to its knees.
And as for the argument that Silicon Alley is driving the city’s economy now, New York points out that the dot-com world is largely dependent on the fund-raising muscle of the financial community.