I've been told privately by a couple of people that layoffs are expected and that some authors will be dropped -- but that's all just speculation at this point. Nobody knows what's going to happen, because nobody knows how the economic contraction will affect book sales.
In past recessions, book sales weren't affected very much. Books are relatively inexpensive and provide hours of comforting escapist entertainment. Whether that historical trend will continue this time around is anyone's guess.
Either way, I'm hearing that publishers will start making some changes to their business models: fewer one-off books, more books published as PBOs, fewer monster deals for new authors. Publishers will probably start to be more prudent when paying big advances -- no more $1.5 million deals for writers who sell $750k worth of books.
We'll almost certainly see a contraction in the number of books published. This is a step that has been a long time coming and is desperately needed. Currently the big houses publish too many books; more than they can adequately promote and sell. By publishing fewer books, and focusing their efforts on the ones remaining, they'll not only improve their bottom line, they'll better serve their authors. (Obviously this means that some writers will get the axe, but only those that were the most marginal anyway.)
All of this is stuff publishers should have done a long time ago. The current economic climate provides a chance for the publishing houses to take steps that will put them on a firmer long-term foundation. Whether or not people are willing to buy books is to a large degree beyond the control of the industry. However, making improvements to the way they do business will benefit them no matter what.