By David Schepp BBC News Online North America business reporter

New York has weathered the worst of its job cuts but must still contend with severe budget woes, an analyst from the region's central bank has said.

Wall Street's slump has hamstrung city finances

"We've had the major impact in terms of jobs," said Rae Rosen, senior economist at the Federal Reserve Bank of New York.

"The major impact here is going to be in the fiscal picture," she told the BBC's World Business Report.

In the aftermath of a slowing economy and the terror attacks of 11 September, 100,000 jobs were lost in Manhattan, many of them high-paying jobs in the city's investment-banking sector.

But Ms Rosen said the bulk of the jobs were in the service sector - retail clerks, cooks and window washers.

So far this year, the city has lost 18,000 jobs, and the New York Fed expects another 6,000 redundancies by the end of the year.

She said the numbers will barely register in the New York economy, making up two-tenths of 1% of the total workforce.

Empty coffers

While the city has witnessed the pain of numerous job cuts, it has another demon with which Mayor Michael Bloomberg must wrestle - severe deficits.

Even the worst of accountants don't want you borrowing money to pay for operating expenses

Rae Rosen, economist

After shoring up a $5bn (�3.2bn) shortfall this year, Mr Bloomberg must somehow find another $5bn to fill the gap for next year's finances - and do it without souring quality of life in New York, which has improved considerably in recent years.

What worries Ms Rosen and other financial analysts is the continued depression on Wall Street, where falling share prices and scandal have taken a mighty toll not only on jobs but in business as well.

Wall Street analysts are saying that after the recent spate of bloodletting it does not expect the markets to be much better soon.

In addition merger and acquisition activity, the life bread of New York's financial sector, will not revive anytime soon, leading to staff cuts and lower tax receipts in city coffers.

"This is the prime engine for revenue growth for the city and the state," Ms Rosen said.

"It suggests the fiscal pressures are going to be multi-year, which is pretty much what we anticipated."

No loans

New York City escaped crisis this year thanks to a one-time $5bn bailout from the state.

The terror attacks added to a gloomy picture

"Unfortunately, we have the same gap next year and our means to close it can't rely on carryover surplus - we've used that up," Ms Rosen said.

Borrowing more money is not a prudent way to go, she added.

"Even the worst of accountants don't want you borrowing money to pay for operating expenses," the Fed official said, explaining debt is usually reserved for long-term improvements, such as infrastructure.

Money flowing in from Washington will not help buttress city finances.

While they will provide stimulus by spurring construction and reimbursing losses, "[Federal money] is not going to close the budget gap."

Slow recovery

Ms Rosen also said the attacks of 11 September, which felled Manhattan's Twin Trade Towers, were not solely responsible for the city's job cuts and current budget woes.

As stocks continued their freefall in 2001, Wall Street firms held off on job cuts, anticipating a market turnaround.

When it was obvious a stock rebound was not coming, the axe fell, slicing tens of thousands of jobs, appearing victims of 11 September.

But it is not all bad news for New Yorkers in search of jobs.

Ms Rosen said the city has added 9,000 in 2002, mainly in the motion picture, health and education sectors and said Wall Street historically is quick to rehire.

Nevertheless, she admitted it is "one of the slowest job recoveries we've seen."