The worst U.S. financial market returns since the 2008 global financial crisis took a bite out of last year's Wall Street bonuses.
- Average New York City banker bonus fell 26% in 2022, returning to pre-pandemic levels after two years of record profits on Wall Street.
- The average bonus is still 2.5 times the median U.S. household income of $70,784.
- City Comptroller estimates one in 11 NYC jobs are tied to Wall Street.
The average bonus paid to New York City securities employees fell 26% to $176,700, New York Comptroller Thomas P. DiNapoli revealed in the department's annual bonus estimate.
That's down from an average of $240,400 in the previous year, when Wall Street profits reached an all-time high, and closer in line with average bonuses prior to the pandemic.
Despite 2022's decline, the average Wall Street bonus remained two-and-half times more than the 2021 median U.S. household income of $70,784.
Annual Wall Street bonuses rise and fall depending on economic and market conditions, but they compose a significant portion of the industry's compensation structure. Investment bankers, for instance, typically derive from 1/3 to 2/3 of their total pay from bonuses.
Market Losses Slash Wall Street's Profits
As the Federal Reserve repeatedly raised interest rates beginning in March 2022, U.S. financial markets slid.
The S&P 500 Index plunged 18%, its worst annual loss since a 37% decline in 2008, and the Bloomberg Aggregate Bond Index sank 13%, making it the worst year ever for U.S. bond returns.
Uncertainty in the markets effectively ground mergers and acquisition activity to a halt. According to S&P Global Market Intelligence data, M&A activity in North America dropped 41.4% in 2022 compared with the prior year.
Wall Street's pretax profit fell 56% as investment-banking fees plummeted, DiNapoli's report stated. With that, Wall Street's collective bonus pool dropped 21% to $33.7 billion from a record high of $42.7 billion in 2021. The bonus pool increased 15% in 2021 and 25% in 2020.
At the end of last year, big Wall Street banks such as JP Morgan (JPM), Citigroup (C), and Bank of America (BAC) were reportedly considering slashing bonuses for investment bankers by as much as 30%. Goldman Sachs (GS) was said to be mulling a 40% bonus cut for its bankers.
Wall Street bonuses have a significant impact on New York's economy. DiNapoli's report indicated the city's securities industry employed 190,800 people last year, the highest level in more than two decades. One in 11 jobs in the city ties directly or indirectly to Wall Street.