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In his campaign ads, it's about jobs. But at his news conferences, Mayor Bloomberg can't stop talking about his plan to create or save 400,000 jobs.

"We're not just optimistic. We're trying to create the reasons to be optimistic," said Bloomberg.

Yet some city workers are feeling a bit pessimistic. That's because the mayor is not backing off his new threat to layoff 7,000 city workers.

"We're required by law to balance the budget," said Bloomberg.

On Wednesday, City Budget Director Mark Page put out a letter asking agencies to trim a combined $350 billion from their budgets and said these cuts could result in the loss of thousands of jobs.

It's still unclear how the new round of budget cuts would affect agencies. The Department of Education, for instance, needs to shave $100 million in spending, the equivalent of 1,200 teachers. Schools Chancellor Joel Klein says he may not have to propose classroom layoffs, but will have to look at other cost factors.

"It's very unlikely to make these cuts without affecting the schools," said Klein.

Bloomberg says layoffs can be avoided if Albany creates a new pension tier and union leaders agree to concessions requiring city workers to contribute to their healthcare costs. But labor leaders charge that the mayor is trying to bully them by negotiating in public, something the mayor denies.

"This is not going over their heads. I have an obligation to tell the public what's going on. It's not my money. It's not the union's money or the employees of the city's money. It's the public's money," said Bloomberg.

The unions say they have identified $200 million in savings, some of it short term. But the mayor says that's not enough and wants to address the long term problem.

"Pension costs and healthcare costs are going to bankrupt the city," said Bloomberg.

For the upcoming fiscal year, pension and healthcare benefits are expected to cost the city more than $13 billion, about 25 percent of the city's portion of the budget.

It's a number made even more staggering when considering the fire department, for example, which pays more in benefits than it does in salaries.

"This is the time when the pressure is on, we have to do things and we have to look forward. The pension option is critically important," said Charles Brecher, Citzens Budget Commission.

At the moment, the issue is the source of rising hostility between the mayor and unions.