||Financial Services Firms Setting Up Shop in Smaller Cities
The U.S. securities industry is booming -- just not on Wall Street.
Smaller cities around the nation have emerged as unlikely hives of financial-services hiring, thanks to lower wages, municipal-tax incentives and the misfortunes of older hubs that are home to companies ravaged by the 2008-2009 financial crisis.
The beneficiaries are spread across the U.S., according to an analysis of data by The Wall Street Journal. In St. Louis, the 19th-largest U.S. metropolitan area, securities-industry employment surged 85% between January 2007 and September 2012 to a recent 12,190, according to figures compiled by Moody's Analytics. New York lost 9% of its jobs in the securities, commodities, asset-management and fiduciary-trust areas over the same period, leaving it with 195,000.
Charlotte, N.C., another big job producer before the crisis, lost 24% of such jobs over the past five years.
The moves are the latest sign of cost cutting as banks and securities firms struggle with soft economic growth, low interest rates and skittish financial markets. The average annual wage for securities-industry positions in St. Louis is $102,000 -- compared with $343,000 in New York. Hiring in lower-cost regions can mean millions of dollars in annual savings.
The shift has left some officials in New York worried about economic ripples stemming from the slow leak of jobs from the nation's finance capital.
Every financial-services position lost means two more in other industries are relinquished in the city and one additional job is lost elsewhere in the state, according to an October report from New York Comptroller Thomas DiNapoli. The move of high-paying jobs also has outsize effects on the finances of states still recovering from blows dealt by the recession.
Some large financial firms are reconsidering pricey locations. Citigroup Inc. intends to move certain New York City employees to Buffalo, N.Y., as part of a larger cost-cutting push announced recently that will result in the loss of 11,000 jobs and the closure of 84 branches. Credit Suisse Group AG recently initiated a review of the 3 million square feet it occupies in Manhattan as it tries to cut a total of $4 billion in costs, said people familiar with the search. The company employs 9,000 people in three buildings. A spokesman declined comment.
Other securities-industry gainers over the past five years include Columbus, Ohio; Des Moines, Iowa; Pittsburgh; Austin, Texas; Boulder, Colo.; Wilmington, Del.; and Salt Lake City, the data show. For the five years ended in September, the top 15 gainers added nearly 27,000 jobs, while New York was losing roughly 26,000.
"I have been on more flights into New York to talk to companies in the last year than I have in the last five years," said Deloitte Consulting LLP's Darin Buelow, who helps Wall Street firms evaluate alternative locations.
One challenge for New York firms is curbing costs without sacrificing skilled employees. More obscure locations are less expensive but lack New York's concentration of talent.
The financial-activities sector -- the Labor Department classification that includes securities-industry jobs along with those in other financial areas, such as commercial banking, insurance and real estate -- is the seventh-biggest U.S. employer, with 7.8 million jobs as of November, Moody's Analytics says.
Departures from Manhattan came to the fore in the 1980s, as firms crossed the Hudson River to set up satellite operations in Jersey City, N.J., or sent workers to nearby Connecticut. Lucrative tax breaks and government loans stoked the shift, including a $120 million package that persuaded UBS AG to leave Manhattan for Stamford, Conn., in 1994.
More moves followed the terrorist attacks of Sept. 11, 2001, as firms searched for safer places to house data and people. In one such move, Goldman Sachs Group Inc. completed a 42-story building along Jersey City's waterfront after the state offered grants it valued at a total of $164 million. Goldman has scaled back the number of workers in Jersey City by 31% over nearly two years, to 2,846, as it adds jobs in other parts of the U.S. that pay a lower average wage, such as Salt Lake City.
Critics say local and state governments tend to overspend with little payoff. "Even if they do help seal the deal, this is really not a good thing from the view of the country," said Howard Wial, director of the Center for Urban Economic Development at the University of Illinois at Chicago and nonresident fellow for the Brookings Institution.
St. Louis's gains are due largely to Wells Fargo & Co.'s decision to keep the city as a major hub following its acquisition of Wachovia Corp., as well as the presence of local independent brokerages Stifel Financial Corp., Edward D. Jones & Co. and Scottrade, all of which have been adding jobs. Missouri officials approved $12.6 million in state incentives to help Wells Fargo with an expansion that is expected to add 400 local jobs.
Local boosters are taking several steps to promote St. Louis as a financial hub: Stifel CEO Ronald Kruszewski plans a 12-foot-high statue of a bull and bear outside his headquarters, for example.
Not long ago, St. Louis was on the opposite side of this employment trend. The 1997 acquisition of hometown bank Boatmen's Bancshares Inc. deprived St. Louis of a large corporate headquarters and resulted in the elimination of 1,400 jobs, or 7% of Boatmen's work force.
James Tricarico, the 60-year-old chief general counsel for Edward Jones, grew up in New York and worked there for 25 years before moving to St. Louis nearly seven years ago. A fan of Italian cuisine, he now eats meals at Charlie Gitto's in St. Louis's Hill neighborhood instead of Il Mulino in Greenwich Village. But "there is no New York pizza here that I've found," he said. "I miss my pizza."
(Source: The Wall Street Journal, 12/13/12)