Cash bonuses on Wall Street experienced a decline in 2023, with an average fall of approximately 2%. This downward trend in bonus payouts can be attributed to two primary factors: the influx of younger individuals in the securities industry and increased market volatility.

Yahoo Finance's David Hollerith breaks down the details, providing insights into how a drop in bonuses can affect the broader economy.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

BRAD SMITH: Well, cash bonuses fell across Wall Street during a challenging 2023. But for some top executives, they were able to buck the trend. Here with the details, we've got Yahoo Finance's David Hollerith. David, what did you find in the millions and the billions of dollars range for some of these executives?

DAVID HOLLERITH: Yeah, so Brad, recent filings have shown us that cash bonuses, despite the New York comptroller finding that on average cash bonuses on Wall Street fell 2% last year. Cash bonuses for CEOs of major Wall Street banks, that includes CEOs of Goldman Sachs, Morgan Stanley, Citigroup and Wells Fargo all actually rose. Now this is interesting for a lot of reasons.

One, I think is just to point out that I think people forget sometimes that the actual Wall Street bonuses do come back to the state and city via tax revenues. So this is something they pay attention to and watch. But one reason why the average might have fallen last year, the comptroller cited yesterday talking to us was market volatility. And then also the amount of younger workers who have actually joined the securities industry last year.

So those are two reasons that are brought up. And again more younger workers joining the industry is overall not a bad thing. But it's obviously a stark contrast to the amount of salary that CEOs of the big banks have that being said, compensation for them is always based around different things. It's not necessarily just how deals are going. But on that note, the big story of last year that we've talked about a lot has been this investment banking slump.

And what's interesting here now is that the investment banking slump, it looks like could have a revival. That means a revival in the IPO market. And also in mergers and acquisitions. And it's important to watch not just because it signals how Wall Street firms are doing and also how morale is for those employees. But also what tax revenues are going to look like for New York State and city.

Now the comptroller told us that they had actually estimated greater declines in the average bonuses from last year. And because of that, they're not-- there's not going to be a negative drag on the overall budget. But it all comes back to just why the revival in investment banking is really important this year and we have been seeing some signs. It also takes us back to today and why it's so important with the Fed not so much about whether or not there are cuts. But whether or not there's certainty in the economy.

BRAD SMITH: David, thanks so much for digging into the numbers here. Laying this out for us. Really appreciate it. Yahoo Finance's own David Hollerith.