The Multiplier Effect
On Wednesday, I went to a briefing about the Wall Street crisis by NYC Comptroller Thompson (here’s a link to the press release about the event). An NYU graduate school student who was there told me, “For any person working in finance, Lehman Bros. was the dream job. They kind of set the standard. It’s pretty shocking.”
Well, it’s even more shocking than you realize. Take a look at some of the actual facts and numbers, and you’ll see what Wall Street’s crisis of confidence can mean for the city of New York.
According to Thompson, the Wall Street crunch goes beyond the financial sector, because it has a ripple effect; for every job cut in the securities industry, another 1.5 jobs disappear.
Nicole Gelinas, a Manhattan Institute Senior Fellow, actually estimated the relationship as one job to two. Therefore, if Lehman Bros. closes, it doesn’t just mean that its 12,000 employees are out of jobs – it means a total of 24,000 New York City jobs are slashed. That’s a lot of jobs.
Also, employees in other industries are very worried. An Ernst & Young analyst who asked not to be named told me that people all over Manhattan are wondering what Lehman Bros. did wrong, so that they don’t follow in their footsteps. (I think we can all agree that sub-prime mortgage greed was a big part of what did Lehman in. That’s not the point right now, but here’s a link to a great non-technical blog post by The Financial Blogger explaining what happened.)
Now, Barclays in London may buy out Lehman Bros., thereby mitigating the damage of the bankruptcy. Even though the price is “far less than Lehman had hoped for” according to a New York Times article, it could save anywhere between 8,000 to 10,000 Lehman jobs.
That could be – as Gelinas calculates – a total of 20,000 jobs saved.
20,000 jobs means 20,000 people eating their lunch, shining their shoes, paying their taxes, and commuting to and from Wall Street.
* Thanks to Caroline Linton, who helped with the reporting in this post.