What's Good For The Goose...

By Daniel Kadlec

You might think times are flush on Wall Street, what with stock prices at historic highs and ridiculously rich year-end bonuses in the bank. Somebody, after all, just paid a record $2 million for a seat on the New York Stock Exchange. And in lower Manhattan supplies remain tight for rental limos and $20 cigars. Strangely, though, supplies aren't tight at all for traders, bankers and brokers. In a striking irony the financial chefs who for years have cooked up corporate takeovers and restructurings--all smelling like layoffs to working stiffs--are today being served those same entrees. Well, bon appetit.

Not that I harbor any ill feelings toward Wall Street's deal machine. To the contrary, I believe in the benefits of cost cutting, carving up and combining companies, and generally placing efficiency and profitability above all else. That's raw capitalism, which keeps U.S. companies fit to win against global competitors and ensures jobs and an improving standard of living for most people. It has its losers, though, and can seem unnecessary when the economy is humming as it is today. But at least now this meal, distasteful to many, is being served in the cook's kitchen.

Just last week the American Stock Exchange and NASDAQ Stock Market confirmed that they are exploring a merger, likely to cost several hundred jobs. For different reasons, recently merged Salomon Smith Barney is cutting as many as 1,500 positions. Chase Manhattan, after combining with Chemical Bank in 1996, is laying off about 3,000. The Swiss Bank Corp. merger with Union Bank of Switzerland has prompted a flood of pink slips in New York City. There's been selective pruning at the merged Morgan Stanley Dean Witter Discover. And since Asia tanked, international firms, including NatWest Securities, J.P. Morgan and Deutsche Morgan Grenfell, have been letting people go around the world. Says Howard Gabler, president of the Wall Street executive-search firm GZ Stephens: "The overall job scene on the Street is pretty bad."

We're not talking bread lines here. There are still jobs to be had--at exorbitant pay levels. At the end of last year securities-industry employment stood at a record 286,000. But that's up only 10% from 10 years ago. In the same period New York Stock Exchange trading volume (a proxy for how much business Wall Street does) increased 178%, and the industry last year posted record pretax profits of $12.2 billion. More work. More profit. Relatively few people. Sound familiar? Wall Street hadn't been totally left out. Its firms have been merging practically forever, but seldom on such an extensive scale, where even giant Merrill Lynch might be bait for, say, Chase Manhattan. In a bull market, and with consolidation running wild on the Street, brokerages are good stocks to own.

Unless, of course, you think we're fast approaching a market top. My best Wall Street sources are in awe at how far stocks have risen in the past three years, and privately many say they are bracing for a fall. They won't necessarily be right. But the tough job scene for their ilk is evidence of their conviction. Keeping down head count in good times may be a grim new reality. But at some level it represents Wall Street's collective stab at timing the market.

Daniel Kadlec is TIME's Wall Street columnist. Reach him at kadlec@time.com