N.Y. feels effect of Wall Street woes
The deepening upheaval on Wall Street has rippled throughout New York’s business community, hurting everyone from luxury goods stores to charities to Manhattan restaurants, store owners and experts say.
With New York already feeling the effects of a weak U.S. economy, the fall of bank Lehman Brothers, the sale of its rival Merrill Lynch & Co. Inc. and the struggles of insurer American International Group, all headquartered in Manhattan, have only added to concerns as Wall Street lays off well-paid bankers and the wealthy rein in their spending.
“These people will probably have to start curbing on some of the more lavish expenses,” said Matthew Miller, editor of Forbes magazine’s list of the richest Americans. “A $20 martini might need to turn into a $15 martini — it’s all relative.
“There’s probably a lot of millionaires who can’t buy their girlfriends Prada bags this Christmas,” he quipped.
The biggest financial industry shakeup since the Great Depression will likely worsen an already tough situation, the city’s restaurant owners and retailers say.
Wall Street’s total compensation is about 35 per cent of all wages and salaries paid in New York.
Each job in the financial sector creates from one to as many as four service jobs, at companies ranging from shops to law firms, economists say.
“There has been a definite downturn in the economy and a restaurant purchase is a dis- cretionary purchase. People don’t have to eat in restaurants,” said Chuck Hunt, executive vice- president of the New York State Restaurant Association.
“The only thing we’ve got going for us in terms of customers are the Europeans that come in with their euros that are worth a lot more than our dollar at this point,” he said.
Sari Brown, chief executive of Internet retailer and boutique store LuxCouture, which sells items priced up to $5,000, said people trying to stay in fashion are definitely shopping more responsibly.
“People want to shop but even the wealthy people, they’re buying differently,” she said, speaking a few yards from Lehman’s midtown building. “Shopping is like a disease and they want to keep doing it, so they shop differently.”
Mayor Michael Bloomberg said it will take a while for the city to bounce back.
“Other companies are facing serious questions about their future, and the uncertainty in the markets means, in all likelihood, that we still have not hit the bottom of the cycle,” he said.
Charities are also suffering from Wall Street’s woes.
“This is the worst fundraising environment I have worked in in my 25-plus year career in fundraising for non-profit organizations,” said Jeff Towers of the American Red Cross.
He said the effects of hurricanes Gustav and Ike alone could reach $100 million and to date the charity has raised only $10 million.
In 2004, U.S. corporations donated an average of 1.5 per cent of their pretax profits to charity, but that portion has since declined to 0.7 per cent, said Mark Shamley of the Association of Corporate Contribution Professionals.