Wall Street Challenges Will Impact NYC — Eric Adams Needs to Implement Spending Cuts Immediately

After a week characterized by fluctuations driven by tariffs in the markets, New York City’s economic outlook might be on shaky ground.

This iconic financial hub risks losing more than just its shine in an increasingly de-globalizing landscape: Billions in tax revenue and numerous jobs are at stake.

Mounting uncertainty will likely lead foreign and domestic firms to become more risk-averse, deterring them from pursuing deals.

A downturn in mergers and acquisitions spells tough times ahead — impacting more than just investment bankers and hedge fund moguls.

While it may be difficult to feel sympathy for an industry where the average bonuses exceed $244,000, New York’s economy heavily relies on Wall Street.

The finance sector contributes roughly 20% of the city’s overall income and is vital for funding a significant portion of essential services and social programs.

According to state Comptroller Tom DiNapoli, approximately 23% of the city’s personal income tax revenue and 7% of its total tax income stems from the securities sector.

This translates to over $5 billion annually from the current year’s $112 billion budget.

History illustrates that the city’s fortunes are closely tied to Wall Street’s performance.

By 1977, the number of jobs on Wall Street had plummeted to 70,000, reflecting a 30% reduction during that challenging decade.

As the city slowly recovered from fiscal challenges, the finance industry thrived during the Gordon Gekko era of the 1980s, more than doubling employment to 160,000.

This boom laid the groundwork for the remarkable safety enhancements and prosperity of the optimistic 1990s.

Today, large banks, hedge funds, and asset managers either lease or own prime office space in the city’s skyscrapers, spending substantial amounts on corporate dinners, making them crucial to sectors like real estate, dining, and retail.

Nevertheless, New York relies on Wall Street far more than the opposite is true.

Finance jobs in the city peaked in 2000 at around 200,000, only to decline after 9/11.

Fast forward 25 years, and despite the sector’s incredible expansion, it now accounts for about 195,000 jobs in New York City.

The reason? Cities like Dallas and Miami are increasingly attracting firms as they opt to establish new operations in the Sun Belt.

Texas has been ahead of New York’s total finance employment for over ten years, and that gap continues to grow.

Major Wall Street firms like BlackRock and Citadel Securities are collaborating to launch the Texas Stock Exchange, slated to commence trading early next year.

Recently, Nasdaq announced plans to open a new regional headquarters in Dallas.

The real concern isn’t that all the premier players in the world’s capital markets will permanently relocate from New York.

Rather, they’ll likely retain a prestigious office and a small team in the city as a meeting point, but move the majority of their functions and workforce to other locations.

In these alternative cities, lower housing and living costs enable firms to offer lower salaries while still providing employees with better overall paychecks.

If the national economy slows, these cost-saving advantages will become even more enticing.

At the same time, many of New York City’s expenditures are fixed and rely on a thriving local economy.

If recent fluctuations in your 401(k) have raised concerns, consider this: the city is obligated to fulfill pension commitments for approximately 750,000 current and retired workers.

When stock market declines hinder the city’s pension funds from achieving their target 7% annual growth rate, Gotham’s taxpayers are responsible for covering the shortfall.

The city’s inflated $116 billion FY 2026 budget cannot sustain itself, particularly with the Trump administration’s reductions in federal funding.

It is imperative for Mayor Eric Adams to tighten fiscal policies and implement emergency budget strategies until the economic outlook improves.

He should initiate a hiring freeze across all non-uniformed positions rather than pursuing his recent plan to add 3,700 new teachers.

Moreover, he ought to close failing schools, merge those with low enrollment, and adjust school-level funding in accordance with enrollment decreases.

Boosting the city’s $2 billion rainy-day fund — while there’s still time — would provide a buffer against a potential recession. Currently, this fund only constitutes 1.7% of the annual budget and has not grown adequately.

Adams could also suspend expenditures related to Local Law 97, which was implemented during the de Blasio administration and mandates significant reductions in carbon emissions across city operations. Pausing these initiatives could save up to $2 billion per year.

Meanwhile, the Department of Housing Preservation and Development plans to allocate a minimum of $700 million annually over the next decade for new low-income housing projects. Scaling back on this project — and permitting the private sector to construct more housing without public financial assistance — could decrease the city’s debt and annual interest expenses.

Reducing expenditure is often unpopular, but Adams shouldn’t postpone responsible action until a financial crisis arises.

Exhibiting strong fiscal leadership could even help distinguish him from his rivals in the upcoming November general election.

After all, in turbulent times, steady leadership keeps the ship on a steady course.

John Ketcham is the director of cities and a legal policy fellow at the Manhattan Institute.