With the capital markets at a near standstill, many corporate lawyers have seen caseloads dwindle this year. Now the latest blowout at Bear Stearns is stoking fears at some law firms about layoffs and job shuffling.

Hardest hit by the credit crunch have been small- and medium-size law firms that specialize in structured finance and mergers and acquisitions. A recent drop-off in productivity in these markets has slowed the pace of revenue growth and, at some firms, prompted management to slash jobs or shift associates to new legal units.

For many lawyers, turmoil in the financial markets has created “a fear factor” about job security, a managing director at the legal recruiting firm BCG Attorney Search, Danice Kowalczyk, said. “Demand for their work is softening, and if their firm isn’t well-leveraged, they may not be able to stay on board.”

One law firm, Cadwalader, Wickersham & Taft, recently laid off 35 associates in its structured finance unit, while Dechert last month eliminated 13 associate positions in its finance and property unit. In a memo, Dechert told its attorneys there was “no demand for them in that group in the foreseeable future” and offered them work in other practice groups at the company.

Other firms, while avoiding layoffs or transfers, have seen demand for specialty finance work decline. Goodwin Procter, for instance, has experienced a slowdown in M&A, while WilmerHale has reported declines in initial public offerings work and Reed Smith LLP has seen a downturn in property finance work.

The legal consulting firm Hildebrandt International Inc. predicts an overall downturn in law firm productivity and profits this year, with revenue growth expected at 6% to 8%, compared with nearly 10% last year, according to a new report. The report, which is based on data from 250 law firms, also found that net income is expected to increase 3% to 5%, compared with last year’s growth of as much as 9%.

Deteriorating conditions in the market have created a “perfect storm” for the legal profession, the report said, adding, “The year 08 is likely to be much weaker” than last year.

Still, it may be too early to tell whether the latest troubles at Bear Stearns and Citigroup, which is considering laying off 2,000 employees, will lead to more lawyer layoffs, the senior vice president of Hildebrandt, Joel Henning, said. Many firms are reluctant to trim associate ranks in response to a crisis, having found that the cost of filling those gaps during a market recovery is exceedingly high.

“Law firms learned their lesson: They tried cutting younger associates in 2001 and ended up paying a high price when things were improving,” Mr. Henning said. “Management is more savvy about when and where to cut costs now.”

Rather than giving rise to lawyer layoffs, the latest failures at large financial companies appear to be driving more attorneys to other practice fields, such as restructuring and bankruptcy. In acquiring Bear Stearns, for instance, JPMorgan Chase expects to generate billions of dollars in legal expenses related to transactional work.

A partner at Reed Smith, Andrew Rahl, said lawyers at his firm are now finding themselves “smack dab in the middle of tremendous boom” in restructuring and bankruptcy work, which appears to be offsetting recent declines in transactional activity. And despite a liquidity frieze for large private equity firms, a partner McCarter & English LLP, Stephen Fields, said there is still a healthy flow of medium-size deals worth between $10 million and $500 million.