DealBook reports that Wall Street firms are expected to dismiss 20,000 more workers in the next two years. That's based on plummeting profit expectations for these brokerages.

The earnings forecast for Wall Street is gloomy. New York's Independent Budget Office (IBO) estimated that Wall Street's profits for 2007 will sink by 85% to the lowest level since 1994. When the final totals are in, profits for 2007 are expected to be $3.2 billion, down from $20.9 billion in 2006. Perhaps optimistically, IBO expects a quick and dramatic recovery -- with Wall Street's profits expected to spike 106%in 2008 to $6.6 billion and rise 85% more in 2009 to $12.2 billion.

I hope for New York's sake that IBO is right about 2008 and 2009. IBO expects bulk of Wall Street's job cuts -- 12,600 -- to occur in 2008 followed by 7,600 cuts in 2009. The IBO's analysis does not take into account layoffs at The Bear Stearns Companies (NYSE: BSC) , whose work force of 14,000 includes about 8,000 employees in New York -- CNBC reported that JPMorgan Chase & Co. (NYSE: JPM) expects to cut 50% of Bear's total work force.

This forecast sounds quite benign to me. But if things do not turn out as nicely as IBO expects, the damage could spread throughout America.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.