State and city officials are bracing for a darkening economic landscape, with Mayor Bloomberg imposing a hiring freeze on his agencies for the first time in five years and Governor Spitzer warning of a metastasizing budget deficit.

The Bloomberg administration yesterday directed city agencies to cease all hiring, except for positions that affect public health and safety, and reduce spending by 2.5% in 2008 and 5% in 2009. The last time Mr. Bloomberg ordered a hiring freeze was in 2002, in the middle of the post-September 11, 2001, recession.

In a memo circulated to city agencies, Mr. Bloomberg’s budget director, Mark Page, blamed the cutbacks on the slowing of the national economy and the local real estate market, as well as on hedge fund losses and the tightening in credit markets, trends that have led to a projected $2.7 billion budget gap in 2009.

At the same time, Mr. Spitzer’s budget office said it expects next year’s budget gap to be significantly wider than it had estimated earlier in the year. Officials are now projecting a fiscal year 2008–09 deficit of $4.3 billion, more than $600 million larger than the shortfall estimated in July.

“This increase largely reflects the impact of the current economic slowdown and problems in the financial services and real estate sectors on revenues, which more than offset lower spending than previously forecast,” the budget office said in a statement.

While officials are scrambling to confront the end of “wine and roses,” the severity of the downturn and the consequence for Wall Street bonuses and salaries, upon which Albany relies heavily for a large chunk of its revenue, remain unclear.

“After three and a half years of solid gains that contributed to record New York City budget surpluses, the securities industry has been rocked by turmoil in the housing and credit markets,” a securities industry report issued yesterday by the state comptroller, Thomas DiNapoli, stated. “These events will exact a toll on profits, bonuses, jobs, and tax revenues, but the magnitude of the impact will depend on the depth and duration of the current credit crunch.”

The report noted that the average salary on Wall Street “surged” by 17% in 2006, to $339,910. Thus year’s bonus pool, it said, would be smaller than last year’s record of $23.9 billion, but the decline may be slight thanks to the strong performance of firms during the first six months.

Despite a decline of 65% in third-quarter profits posted by the city’s seven largest financial firms, profits overall for the year remain ahead of last year’s record pace, the report said.

Mr. Spitzer has about two months to draw up a plan to balance the budget. In January, he will release his executive budget, which is essentially a starting point in negotiations between the executive chamber and the Legislature.

Weighing on the governor are promises he made to increase public school aid by $7 billion over his first term and infuse billions more dollars into a property tax relief program.

The widening deficit projections may force Mr. Spitzer to try to postpone or cancel those increases, a move that would likely meet fierce resistance from lawmakers in the state Senate and Assembly.

Mr. Spitzer will almost certainly look to carve out substantial savings from the health care industry and Medicaid, areas he sought to squeeze during this year’s budget battle.

Spurred by an aggressive advertising and lobbying campaign waged by the 1199/SEIU health care employees union and state hospital associations, the Legislature ended up restoring most of the Medicaid cuts demanded by the governor.

“There are things we can do to lower that gap that don’t get into the really brutal cuts that people fear,” Mr. Spitzer’s budget director, Paul Francis, said in an interview.

“We’re going to have to find some one-shot revenues because we have not been following, engaging in discipline over a long period of time,” he said. “If we had been engaging in spending discipline over a longer period of time, we would have more reserves that we could apply to the budget in bad years like this one.”

Budget watchdog groups typically frown upon relying on nonrecurring revenue sources to balance the books, especially when the state is not facing a fiscal crisis, arguing that practice breeds poor fiscal habits.

Governor Pataki, who often criticized Governor Cuomo for employing fiscal “gimmicks,” incorporated billions of dollars of one-shot revenue into his budgets.

In 2003, as New York was struggling to pull out of the post-September 11 economic downturn, Mr. Pataki authorized the sale of $4 billion in bonds backed by tobacco settlement money to help balance the budget. He also tapped into billions of dollars in revenue from the conversion of Blue Cross and Blue Shield to a for-profit corporation.

Mr. Francis said the administration anticipates a greater-than-expected windfall from the merger of Group Health Inc. and the Health Insurance Plan of Greater New York and their conversion into a for-profit publicly traded insurance company.

The governor has said he would limit state spending increases to the rate of personal income growth, which is estimated at 5%, about a percentage point lower than spending growth in this year’s enacted budget.