May 14 (Bloomberg) -- JPMorgan Chase & Co., the third- largest U.S. bank, may eliminate 4,000 of its own staff as it brings on employees from the purchase of Bear Stearns Cos. and financial markets continue to deteriorate, a person familiar with the matter said.

Of the cuts, about 2,000 will be JPMorgan employees replaced by those who held the same jobs at Bear Stearns, the person said, declining to be identified because all employment decisions aren't complete. As many as 2,000 other workers at the New York- based bank could be terminated as investment banking slows.

``Some of that will come because investment banking fees are down,'' said Frederic Dickson, chief market strategist at Lake Oswego, Oregon-based D.A. Davidson & Co., which manages about $23 billion including JPMorgan stock. ``It's in response to economic circumstances in a slowing environment.''

Chief Executive Officer Jamie Dimon said at a May 12 conference that JPMorgan found spots for 6,000 of Bear Stearns's 14,000 employees. He also told investors that fees from investment banking and trading revenue would be lower in the second quarter.

The integration of Bear Stearns was ``proceeding well,'' Dimon said, though he urged analysts to wait a year before judging whether the deal was a success. Once the fifth-biggest U.S. securities firm, Bear Stearns was forced to agree to the takeover on March 16 after customers and lenders fled because of speculation that the company faced a cash shortage.

``We are trying to keep the absolute best people, strengthen our businesses and hopefully gain a little bit of share,'' Dimon said at the conference.

Recession `Just Starting'

JPMorgan has posted about $10 billion of writedowns and losses since the beginning of last year, compared with more than $40 billion at bigger rival Citigroup Inc. Dimon said the capital markets crisis sparked by last year's collapse of the subprime mortgage market is about 75 percent over. A U.S. recession is ``just starting,'' he said.

The merger is expected to be complete around June 1. The cuts were first reporting by Reuters.

JPMorgan rose 43 cents to $45.91 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 5.2 percent this year compared with an 8 percent drop in the 24-stock KBW Bank Index.

JPMorgan spokeswoman Tasha Pelio declined to comment.

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: May 14, 2008 16:28 EDT