“One of Wall Street’s most-bullish economists, Merrill Lynch & Co.’s Bruce Steinberg, was dismissed Thursday — the latest casualty of the financial industry’s retrenchment,” writes Jon Hilsenrath in today’s Wall Street Journal.

“A person familiar with the matter said the dismissal was part of a reorganization of the investment bank’s research operation in which economics and market strategy groups were being consolidated. In addition to Mr. Steinberg, two other economists, Matthew Higgins and David Horner, also were dismissed.”

“Mr. Steinberg made his reputation at Merrill for his endorsement of the idea that the U.S. had a ‘New Economy.’ As the Nasdaq Composite Index was nearing its peak of 5048.62 in March 2000, a Merrill Lynch economics report written by Mr. Steinberg declared, ‘It’s Not Tulip Mania.’ That title referred to the famous bubble in prices for tulip bulbs in Amsterdam during the 1630s. In Mr. Steinberg’s view, ‘Much of what is happening in the [2000] equity market is a rational response to a huge ongoing shift in economic reality.’ “

“He stuck to his bullish tone through much of the downturn. In June, when The Wall Street Journal surveyed economists for their economic-growth projections for the rest of 2002, he estimated the economy would grow by 4.5% through the second half of the year. The gross domestic product grew at an annualized rate of 3.1% in the third quarter and many economists now expect the fourth-quarter growth rate to be about 1%.”

“In response to the weakened economy, Mr. Steinberg had been ratcheting down his growth expectations recently. Though in one economic commentary he noted that strong productivity growth would lead to upside surprises in earnings in the months ahead. ‘The recovery will resume,’ he said.”

“Susan McCabe, a Merrill Lynch spokeswoman, said Mr. Steinberg’s departure from the firm wasn’t related to either his forecasting record or his history of bullishness. Merrill laid off 1,200 people in the third quarter of this year and has eliminated 18,600 jobs since the end of 2000. ‘We’re actively managing our resources including expenses and head count,’ she said.”