eFinancialCareers

The job-cut announcements since last summer were only a prologue. The worst damage still lies ahead.

That message - which we spotlighted in "Our Take columns" on Jan. 11 and Feb. 1 - received further documentation and elaboration this week in The Wall Street Journal.

Bearing the scary headline, "Grim Reaper of Jobs Stalks the Street," Dennis Berman's "The Game" column warns that top Wall Street executives foresee the industry's work force shrinking as much as 20 percent, which would take job rolls back to "mid-1990s levels."

Lehman Brothers' 5 percent layoff, announced Monday, is "just the start," says the Journal. "Many privately say industry layoffs will be worse than in the 2001-2002 down cycle. Others are already invoking the bloodlettings of the early 1990s."

Wall Street recruiters say they're deluged with resumes already. Options Group told the Journal an average of 100 pour in each day, and only 3 percent of them will get placed. Recruiters have been giving eFinancialCareers similar reports since mid-January.

Predictions for further, substantially larger layoffs are rooted in the ongoing deterioration of key investment bank revenue streams. The continued decline of merger, underwriting and lending business belies the whistling-past-the-graveyard mood that many bank chiefs adopted in the early months of the downturn, and a few are sticking with to this day.

Citing recent Dealogic figures, the Journal reports U.S. investment-banking fees are off 48 percent from a year ago, lending revenues have collapsed 84 percent, mergers are down about 50 percent, and debt and equity underwriting fees are each off by 21 percent. Some corporate lending bankers are reporting to work only two days a week, the paper says.

Banks held back from deeper job cuts on the rosy assumption that credit markets would soon recover. Instead, things are getting worse. Commenting on its fourth-quarter results Monday, Blackstone Group President Hamilton James said he doesn't expect conditions to improve until 2009. Lehman could end up chopping staff by a further 5 percent - on top of the 5 percent layoff reported this week - an unnamed insider told the Journal.

Within investment banking divisions, the story says the ax is most likely to fall on technical experts - "the wonkier types who actually execute the transactions." Conversely, banks will strive to hold onto bankers with the best personal relationships, so as to maintain their "coverage platforms." Other payroll-paring tactics might include furloughing associates for a year, cutting bonuses, and kicking senior bankers upstairs with reduced compensation packages.