RPT-FEATURE-U.S. small businesses feel Wall Street's pain

By Jim Finkle and Scott Malone

BOSTON, Nov 20 (Reuters) - Wall Street's pain is rippling through U.S. small businesses, as bankers who once pulled in million-dollar bonuses lose their jobs and cut back spending on everything from parties to home improvements.

Among those hit is Felice Pomeranz, a Boston-based harpist who has weathered two major recessions in 26 years and has never seen times so tough.

"This is the worst. It's terrible," said Pomeranz, a performer who also books other musicians to perform at corporate events. "Musicians are dying to work."

Bookings for corporate events by her company, Gilded Harps, are down as much as 70 percent from a year ago, with work for financial firms practically nonexistent.

The major financial services firms that are not collapsing -- such as Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N) and Fidelity Investments -- are tightening up as they prepare for the worst, making headlines as they lay off thousands of workers.

"They are driving demand for all kinds of other industries -- whether it's home improvement, contracting, landscaping, furniture, entertainment, restaurants," says University of Massachusetts economist Michael Goodman. "Small business will bear more than its fair share of the pain."

TRICKLE DOWN EFFECT

Small businesses employing 49 or fewer people shed 25,000 jobs in October, the first time they had cut employment since 2002, according to figures from Automatic Data Processing Inc (ADP.O), the world's largest payroll processing company.

Budgets for big corporate events are down from last year.

"When the economy is like this, It turns into things that are not as expensive. It's no longer a tenderloin and shrimp party. It's beer and wine instead of a full bar," said Michele Stump, a manager at Boston's East Meets West Catering.

"People are hesitant to do anything expensive because of how it looks," Stump added. "It almost doesn't look right."

Some 3.9 million Americans are now drawing jobless benefits, a 25-year high, according to Labor Department data released on Nov. 13.

Retailers and restaurants -- about 90 percent of which are small businesses according to the U.S. House of Representatives Committee on Small Business -- are also feeling the pinch.

In Boston, a hub of the hard-hit mutual fund industry, restaurant sales dropped off suddenly mid-September, as the credit crunch forced Lehman Brothers Holdings Inc (LEHMQ.PK) into bankruptcy and prompted the U.S. Federal Reserve to make an emergency loan to American International Group (AIG.N).

Higher-priced eateries have been worst hit, said Peter Christie, chief executive of the 5,000-member Massachusetts Restaurant Association. "Monday and Tuesday nights have gotten quiet as the economy has slowed," Christie said, pointing to dearth of business travelers looking for sustenance.