Property Grunt

Tuesday, March 25, 2008

I think I am safe for now.

Layoffs in the financial sector have been going on for the past couple of months and
I guess when the New York Times says is it is official but as Lockhart Steele, General of the Curbed army, Lockhart Steele said in a recent email "The other shoe never drops for media until after the fact."

In a current entry of Curbed, commentors went to town on the article like paparazzi spotting Britney Spears forgetting her undergarments.

Here are two quotes that I found quite sobering.

Last year, the finance industry was responsible for nearly a third of all wages earned in the city, the highest in modern times. And each Wall Street job supports three workers in other sectors.

The firm’s chief economist, Mark Zandi, said of the current round of cuts: “It won’t be the same kind of job loss. Back in ’01 or ’91, it was a much larger share of the back-office jobs. But in terms of compensation, the impact could be just as significant. One hedge fund job lost today is worth 10 back-office jobs in the last downturn.”

By the end of next year I can see a number of real estate brokerages shutting their doors, particularly the brokers that deal with rentals and have multiple storefronts. It is just a matter of trickle down economics. Once the trickle stops, everything dries up. The force that has the led charge in higher rents and selling prices for homes in New York City were FIRE (Finance Insurance and Real Estate) Teams. I would go as far as saying the money that a member of a FIRE team spent supported an army of people. When that source of income dries up those people have to look for other sources of income or go elsewhere for money. What is really frightening is that the after shocks are going to be felt in places we would never suspect.

I recently overheard a conversation between two people that was quite chilling.

“So I think they are going to analyze the situation and look at doing layoffs in April.”

“So another round will happen in April?”

“I guess but I think I am safe for now.”

Until next week.