New York's two biggest banks are also among its largest employers and their diverging fortunes are increasingly becoming keys to the city's economy.
Struggling with plunging profits, J.P. Morgan Chase is planning to cut 2,200 jobs, many of them in the city, as bad telecom loans hammered its results in the last three months, while investment banking remains slow.

Citigroup, however, is still boosting profits and isn't expected to do as much trimming.

"Wall Street's decline is going to cause a hangover in New York City," said Brock Vandervliet, a bank analyst at Lehman Brothers. Still, "having more than one extremely large organization is a positive."

Wall Street firms, which cut 19,000 city jobs in the last year, have contributed to a recession in the city that's been continuing for more than 18 months.

"There's a ripple effect," said Rae Rosen, a senior regional economist at the Federal Reserve Bank of New York. "It touches retail sales and services of all kinds."

With each investment banking job cut, the city loses at least two other jobs, according to a New York Fed study.

Lawyers who provide advice to the financial services industry can be as vulnerable to losing a job after Wall Street execs gets pink slips as the deli worker who prepares their lunch.

"The industry is one of the prime engines of growth for the city," said Rosen with securities firms accounting for as much as 25% of annual city income.

Additionally, when Wall Street firms cut jobs, they also often vacate offices. Vacancy rates for top tier office buildings have climbed to 10.7% from 2.4% two years ago, according to Cushman & Wakefield.

"All the large financial services firms are analyzing ways in which to work out of excess space created by recent layoffs," said Myers Mermel, CEO of Tenantwise, a real estate firm.

These cuts don't include bank branches, which have been very profitable for both J.P. Morgan Chase and Citigroup.

"The banks have refocused on consumer banking," said Vandervliet.

Still, some economists said the majority of the Wall Street cuts have already occurred.

"We're probably seeing the last 25%," said Rosen. "Employers are adjusting to the new market conditions."

At J.P. Morgan Chase, where the company has already cut 45% of its investment bankers since Chase Manhattan bought J.P. Morgan for $32 billion in 2001, the special challenges come from the fact that banks were merging just as the market went into a tailspin.

"The situation is (like) getting your pilot's license and, on your solo flight, flying into a thunderstorm," said Vandervliet. "They just closed the deal when the markets began a slide from which we still haven't recovered."

To be sure, all Wall Street firms have been struggling in the current slow market. Merrill Lynch said last week it cut 1,200 jobs in the last three months.

Wall Street's continuing cuts will likely slow the city's recovery for some time.

"We're loooking at a tight fiscal situation for the balance of this year and for the next fiscal year as well," said Rosen.