Wall Street has long been the center of the American financial universe.
Home to the New York Stock Exchange, the New York Federal Reserve, and many important financial institutions, lower Manhattan has historically held enormous sway over the financial industry.
That, however, is changing.
Growth in financial services jobs has stagnated in the New York City area and it may be for a simple reason: cost.
New York Fed President William Dudley remarked at a press briefing attended by Business Insider that the number of Wall Street jobs actually in New York City has stagnated since the global financial crisis.
In Dudley’s opinion there are three main reasons for this:
- The sector had too many people in the first place. “One hypothesis is that the sector itself was overheated,” said Dudley. “In the run up to the financial crisis, there was a lot of financial activity that was just not sustainable… some of that just sort of went away.”
- Regulation has made it harder for companies to generate returns needed to increase hiring. “Another competing hypothesis is that there has been an increase in regulation and supervision and this is making it more difficult for financial firms to make profits,” said Dudley. “If you look at the profitability of the financial institutions… their return on equity is lower than it was before the financial crisis. This probably has some implications for job creation.”
- New York City is just too darn expensive. “Another factor is pressure on profits that leads to more focus on costs,” continued Dudley. “It raises the question is New York City the best place for locating certain back office operations and people have been moving back office operations to lower cost places and that’s probably a factor as well.”
So in an industry that is trying to pare back costs and keep pay lower, the actual Wall Street is just too expensive for the companies that made it famous.
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