Wall Street gears for cuts in workforce

WALL STREET is preparing for its first general round of redundancies in almost five years, as rising US interest rates begin to take their toll on the profits of American securities firms.

The slowdown in bond underwriting and trading has spilled into the firms' equity businesses, prompting predictions of dramatically lower profits for the rest of 1994. Underwriting and sales volumes fell almost 20 per cent during the first half of the year, while the value of transactions withdrawn or postponed this year has soared to dollars 5.45bn ( pounds 3.54bn).

The fall-off will end a remarkable earnings run for Wall Street, which has set new records in three successive years, and almost certainly reverse the steady growth in employment that has brought staffing levels to within a few thousand jobs of the 1987 peak of 262,000.

While managers have generally been more cautious in rehiring since the bloodbath of 1990, employment levels at most firms still assume 10 per cent growth in business for the coming year. So while business has not been bad in recent months, it is off from last year's boom, leaving most firms heavily overstaffed.

Merrill Lynch - Wall Street's largest firm - has already let go of almost 5 per cent of its fixed- income staff, about 100 people, while Paine Webber has cut 35 jobs, about 8 per cent of its bond operation. Prudential Securities has also announced redundancies, and Goldman Sachs is reportedly planning a restructuring that would remove a layer of middle-level partners.

Other firms are planning cuts of as much as 10 per cent of their workforce by the end of the year, an informal survey of the largest firms suggests.