Towns That Could Be Hit the Worst by the Financial Crisis

How many former Lehman Brothers bankers or AIG executives are likely to be buying a Park Avenue apartment or a home in Darien, Conn., this year? Most likely answer would be not many at all.

As anyone who works on Wall Street, invests in the stock market, or just reads the newspapers knows, the past few weeks for the financials sector have been bad as Frankenstein's sister. People have seen their net worth gutted, if not wiped out completely.

But Wall Street's problems are going to have a direct effect on communities around the U.S and not just because the proposed $700 billion bailout will result in higher taxes for most Americans. The impact will spread beyond the banks themselves to their back-office and IT operations, accountants, lawyers, and other professional service employees who depend on work from finance companies. It will also reach regional banks across the country. Credit-card companies and firms that deal with auto loans are also volatile as the credit market tightens. Even insurance companies, which have remained strong, could be hurt if the economy worsens and workers drop existing policies and decide not to take on new ones. From CEOs to security guards, the financial, insurance, and real estate sectors employ approximately 9.8 million people in the U.S. alone, nearly 7% of the entire American workforce, and their spending potential is even greater.

New York's Domino Effect

Many of these jobs often tend to group around certain towns; bankers in one community and tech support in another. And while Manhattan is at the center of the turmoil, the fallout will be nationwide. Already the financial sector alone has lost 10,000 jobs through July, or about 2% of finance jobs. Moody's Economy.com projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.

Economists are predicting that Manhattan real estate prices will finally sink under the pressure of financial-sector layoffs and shrinking Wall Street bonuses. Wall Street accounts for about 12% of jobs in the city of New York, and a quarter of salaries.

"New York is the stone in the puddle that ripples across the country," said Scott Simmons, vice-president and founding partner of Crist/Kolder Associates, an executive recruiting firm in Chicago