(Reuters) -- Wall Street's bonuses fell nearly 25 percent in 2011, a New York City fiscal watchdog estimated on Monday, a less severe drop than the industry had anticipated, though still likely to deal a blow to the economies of New York City and New York state.

Compensation experts had said this important component of total wages earned by securities industry employees would plunge 30 percent to 40 percent.

However, the decline in bonuses as estimated by the New York City Independent Budget Office was nearly twice that forecast last week by the state comptroller, who had forecast a 13 percent shrinkage, to $121,150 per person.

Profits earned by Wall Street firms were estimated by the Independent Budget Office at $10.5 billion for 2011, a steep drop from $27.6 billion in 2010.

Last week, State Comptroller Thomas DiNapoli forecast that Wall Street's profits in 2011 would not top $13.5 billion.

Wall Street, which powers the economies of New York City and New York state, is expected to shed 4,300 jobs in 2012, while wages, including bonuses, will fall 7.5 percent, the Independent Budget Office said in a statement.

In contrast, the City Council Finance Committee, in a separate report issued on Monday, said that in 2011 the average wage earned by a securities industry worker should rise 1.6 percent to $369,000 a year.

Wall Street's profits and high compensation drive job creation in a host of other industries, from law firms to restaurants.

The forecast for a 2011 pay increase for Wall Street workers

looks slim when compared with the 17.6 percent gain seen in 2010 that the Finance Committee estimated.

The forecasts by the Finance Committee and the Independent Budget Office, which plays the same role for city that the Congressional Budget Office does for Congress, show ongoing struggles for the securities industry, which faces stiffer federal regulations and reduced trading volume.

Europe's debt problems also present a challenge for both Wall Street and the entire U.S. financial sector.

U.S. banks have about $80 billion of exposure to Spain, Italy, Portugal, Ireland and Greece, the Finance Committee said in a separate report issued on Monday.

"On a positive side, industry reports suggest Wall Street has been pricing in the possibility of a Greek default since early 2010," the Finance Committee report said.

The Independent Budget Office, the Finance Committee, and City Comptroller John Liu on Monday presented their analyses of Mayor Michael Bloomberg's $68.7 billion budget plan.

Tax revenue should surpass the mayor's forecast by $227 million in the fiscal year that ends on June 30, and by $380 million in the following year, the Finance Committee said.

New York City's economy, despite Wall Street's ongoing upheaval, has added back 64 percent of the 139,800 private sector jobs lost during the recession, according to the Finance Committee. However, the city's unemployment rate, after falling to 8.6 percent in April 2011, has risen since June and hit 9 percent in December.

The Independent Budget Office predicted the city would collect $230 million more tax revenue in the current fiscal year. But tougher regulations for Wall Street, which could clip the sector's profits, led the IBO to cut the forecast for tax revenue it made in December for 2013 by nearly $460 million. For fiscal 2014, it cut its estimate by $630 million.

Still, the comptroller predicted that curbs on proprietary trading could cause new companies to spring up as securities companies clamp down on this activity.

"It is our feeling that presumably, proprietary trading operations that are spun off by large financial firms will still operate and for the most part would stay in New York City," he said in a statement.

(Reporting by Joan Gralla; Editing by James Dalgleish, Dan Grebler and Bob Burgdorfer)

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