Thousands of people on Wall Street may be sacked as the dramatic slowdown in almost every line of business the industry is in triggers cost cuts on a scale far beyond anything seen so far.

That, at least, is the view of Oppenheimer & Co. analyst Meredith Whitney, whose bearish—and accurate—calls in the past year have won her a wide following.

In a report issued Monday, September 8, Whitney observed that revenues for Wall Street firms have declined by a brutal 63 percent in the first half of this year. Yet compensation costs, by far the industry’s largest expense, declined by only 24 percent. Non-compensation costs, such as travel and entertainment, have actually risen by a startling 25 percent.

As a result, she concludes, brokerage firms will soon begin to shed staff at a degree unseen since the technology-stock bubble burst earlier this decade. During that miserable stretch, 37,000 New Yorkers who worked on Wall Street, or nearly one in every five, were sacked.

“The slowdown in business today is far more pronounced and has been far more protracted than it was in 2001/02, hence we believe this resize will be at least equally painful,” she wrote.

The latest data from the U.S. Bureau of Labor Statistics shows that 10,000 New Yorkers in the securities industry lost their jobs over the 12-month period ending in July, 5 percent of the city’s best-paid workforce. Those numbers are preliminary and likely understate the damage since they don’t include people who lost their jobs but are still collecting severance payments.

In the coming weeks, as job losses from the collapse of Bear Stearns are tallied up, the figure is likely to increase significantly. In June, Crain’s New York Business estimated some 22,000 Wall Street jobs would be lost, but the city’s Independent Budget Office has forecast that 33,000 Wall Street jobs will be eliminated by next year.

To date, most brokerage firms have been reluctant to engage in large layoffs because they believed that, outside of their troubled mortgage divisions, revenues were holding up fairly well. But their opinions are likely to change in the coming weeks as the firms, which began their fiscal fourth quarters last week, conclude that business won’t pick up anytime soon.

For example, initial public offerings for U.S. companies have shriveled by 75 percent to date this year, according to Renaissance Capital in Greenwich, Connecticut. Global mergers-and-acquisitions volume is down by 27 percent, research firm Dealogic reports.

Debt sales worldwide are down 47 percent during the past 12 months, according to Oppenheimer. Backlogs of investment banking deals waiting to be completed decreased during the second quarter at Goldman Sachs and Lehman Bros.

Laid-off employees figure to receive generous severance packages and outplacement services when they’re shown the door. Those who remain employed stand to collect minuscule bonuses compared with what they’ve grown accustomed to in recent years.

Johnson Associates, a compensation consulting firm, projects a 25 percent decline in bonuses, though some bankers will see much steeper drops.

Filed by Aaron Elstein of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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