IT WASN’T PRETTY IN THE BIG CITY

City living got a little more tricky in 1998.

The stock market’s volatility, coupled with news of massive layoffs at companies like Merrill Lynch & Co. and the newly minted Citigroup Inc., made clear just how tied many big cities have become to the financial services industry.

When the stock market stumbled in August and October, so did jewelry sales in Manhattan and Range Rover purchases in Denver. Restaurateurs in Boston scrambled to lower dinner prices while travel agents in Boca Raton, Fla., searched for lower hotel rates for business clients. In New York City, for example, 13% of jobs and 22% of personal income are from financial services.

Boston, home to such giants as Fidelity Investments and Putnam Investments, has seen mutual fund jobs climb nearly 70% since 1990, to account for 13.4% of the inflation-adjusted wages in the city, compared to 7.5% eight years ago.

Mark Zandi, chief economist at Regional Financial Associates in West Chester, Pa., says many state and city officials are worried over the dependence on one sector. “They know it’s a problem,” he says. “Many want to make sure they don’t base tax-spending decisions on reserves that may easily dry up.”