Houston, do we have a problem here?

Reader Snotty Philistine just posted the chart I duplicate above, and it reminded me of a story I saw in yesterday’s NY Post, Wall Street bonuses are expected to plunge.

Wall Street bonuses are projected to plunge 22% this year as mounting recession fears and decades-high inflation weigh on the market, according to a report Tuesday from New York State Comptroller Thomas DiNapoli.

The 22% decline in revenue would mark a stark reversal from Wall Street’s windfall the previous year, when the average bonus paid to securities industry workers in New York hit a record $257,500. If it holds, the comptroller’s projection would place the average 2022 bonus at roughly $200,850.

“The last two years of profits and bonuses fueled in part by the extraordinary federal response to the pandemic were not sustainable,” DiNapoli said in a statement on the report’s findings.

“As the sector slows down in 2022, leading firms are reviewing staffing and office space needs and a prolonged downturn could negatively impact state and city coffers,” DiNapoli added. “Continued support for other sectors that have been slow to recover is needed to speed recovery to their pre-pandemic levels and to help offset the decline in Wall Street-related tax revenues.”

The comptroller’s office noted the projected 22% drop could prove to be conservative.

… Wall Street’s pretax profits in the first half of 2022 declined 56% compared to the $31 billion they earned in the same period one year ago, the report said. The comptroller noted the industry’s interest-related expenses tripled compared to the first half of 2021 as the Federal Reserve hiked interest rates.

“Profits so far in 2022 have returned to the range experienced prior to the pandemic. Challenging market conditions persist, and profits for the third and fourth quarters may see further declines,” the comptroller’s office said in a release.

I’d dismissed the article when I read it yesterday because merely returning to normal shouldn’t be that big a deal, and it’s hard to dredge up too much sympathy for an industry whose workers, according to the state comptroller earned an average compensation of $516,560 last year – more than five times more than the average pay in other private sector jobs based in New York. That figure included the record $257,500 average bonus payment. And I’m still not sure how much a 22% cut in that bonus will hurt our model Wall Street first-time buyer, but it might. The increase in mortgage payments on that hypothetical $1.7 starter home amounts to $45,000, and the 22% bonus hit would be another $56,650. So our happy East Sider will have about $100,000 less to play with; an amount just about equal to the annual cost of that 7.25% mortgage.

Of course, even that limited whack assumes that there will be a paying job to telecommute to next year.