The intensity and timing differs from account to account; a source tells GlobeSt.com, for instance, that layoffs could begin as soon as early next week and impact almost every department, instead of focusing on investment banking or other specific departments that have been suggested in other accounts. Cutbacks could reach as high as 20%, according to the source; however other reports have cited lower percentages, under 10%.

Whatever the final number, it will affect the impacted workers of course, as well as add to the rampant sense of malaise on the Street. It may well also contribute to the creeping increase in vacancy in New York City's real estate market, which is heavily dependent on the financial sector. Statistics from newly issued reports show a rise in availability, a dip in asking rents and a dropoff in leasing velocity in the Manhattan market.

A Studley Q2 report noted that rental rates declined by 2.2% to $69.29--the first decline since 2005, while availability jumped to 8.2%. "Layoffs in the financial sector have fueled speculation about the amount of sublet space that would come onto the market and to what extent rents would decline," Steve Coutts, Studley's SVP of national research services, says in a prepared release. "But during the first half of 2008, the proverbial axe fell, resulting in sublet space that spiked to 7.8 million sf from 6.2 million sf in January, and closed at 8.3 million sf in June."

While the numbers are clearly heading in the wrong direction, there is still hope that the damage may be contained. "If the markets get worse and the S&P continues to drop and credit markets continue to deteriorate, we will certainly see more layoffs," James Feldman, an analyst with UBS, tells GlobeSt.com.

However, he points out this downturn is a more measured one than 2001-2002. "In this cycle companies only took the space they needed and hired only the people they needed." Also, layoffs have been more targeted which would mean a company that wishes to put space back on the market would have to reconfigure its existing workforce, an expensive proposition.

"The in-place rents these companies are paying are still less than market rates, so if they make the wrong decision of putting space on market it could wind up as a losing economic proposition." The common sentiment is that the downturn is not proving to be as bad as original fears suggested but the market is not in the clear yet, he concludes. The fallout from a round of layoffs will have wider implications than just for the city's real estate market, or its workers, of course. Determining its ultimate impact on the financial markets--and within Lehman itself--though, is difficult as much of the investment bank's maneuvering is still behind the scenes, with only hints emerging from unsubstantiated reports and the company's recent quarterly earnings.

For instance, the company is reportedly in talks to sell its entire $40-billion real estate portfolio, perhaps to BlackRock and Blackstone, according to reports. The company has also been shoring up its financial position in other way; according to its Q2 figures it has reduced exposure to residential mortgages, commercial mortgages and real estate investments by approximately 20% in each asset class, and strengthened its liquidity and capital position by growing the Holding Co. liquidity pool to $45 billion from $34 billion at the end of the prior quarter.