NEW YORK -- Wall Street's four-year jobs expansion boom could end in painful retrenchment as early as December and bonuses for some could take a hit, too.
The jobs ax may cut swiftly and deeply, experts said, as turmoil in the credit market and mortgage industry spreads to other corners of the U.S. economy.
"It would not be surprising, should the market continue to correct, that come December people will be surprised by the paucity of their bonuses next year," said Harlan Platt, a business professor at Northeast University who has written books about corporate meltdowns. "And a goodly number may find themselves looking for work elsewhere."
That would be a turnabout from a hiring binge that looked healthy as recently as two months ago, before the subprime mortgage crisis began to roil larger brokerages and hedge funds and shaky credit markets stalled big corporate takeovers.
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Johnson Associates said aggressive U.S. hiring will be hard to maintain. But it said strong growth in the first half of 2007 should lift bonus payouts over the record set in 2006.
Employment in the U.S. securities industry reached 848,300 jobs in June, a full recovery of the jobs lost between the March 2001 peak of 840,900 and the October 2003 bottom of 751,000, according to the U.S. Bureau of Labor Statistics.
Since the end of 2001, the combined employment at Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs, and Merrill Lynch has risen 28 percent to nearly 192,000 people worldwide, according to their financial statements.
The two smallest Wall Street firms led the pack in recent years, with Lehman Brothers doubling its worldwide payroll — from 13,100 to 28,323 — on acquisitions and internal growth. Bear Stearns was No. 2 with a 43 percent gain. Goldman Sachs, the largest firm by market value, was not far behind, with employment increasing 42 percent.
Bear Stearns, which declined to comment for this story, could be hardest hit because of its strong revenue ties to the slumping mortgage industry.
In the second quarter, Bear Stearns' non-compensation expenses rose 14 percent as headcount rose and the company spent more on technology. Meanwhile, net revenue growth was a slack 0.5 percent while rivals reported double-digit gains.
Bear recently fired its co-president Warren Spector after two hedge funds collapsed. And despite a number of initiatives since 2000, the company lags its bigger Wall Street rivals overseas, where growth could offset a U.S. downturn.
U.S.-based employees at the large brokerages could be hardest hit because operations in Europe and Asia are growing faster than theirs. For example, Merrill Lynch said non-U.S.revenue grew four times faster than in the United States during the second quarter.
"Indeed, all of the growth for the brokers in the recent quarter was from outside the United States," Deutsche Bank analyst Michael Mayo said in a research report.
Michael Strople, an economist at the U.S. Department of Labor, said employment gains in the securities industry track growth in stock market value, particularly on the Standard's and Poor 500 index, which is down 6 percent from this year's high.
Nouriel Roubini, a professor at New York University's Stern School of Business, agreed that protracted turmoil in the mortgage and credit markets and U.S. economic growth of less than 1 percent could lead to job and bonus cuts.
"There may be a meaningful reduction in bonuses this year and next year," he said. If that happens, U.S. brokerage workers are more susceptible to cuts than their peers overseas.
"The rest of the world is growing faster," Roubini said. "The economic and financial pain may be more concentrated in the United States."
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