Until last winter, Bob Salisbury was a successful defense contract consultant, raking in bonuses on top of a hefty salary that helped put his household income near $150,000. Now he is a casualty of military cutbacks: He can't afford a new suit for his son's wedding, he has no plans for a vacation and he fears he may lose his $250,000 Reston home.

For thousands of Washington area workers and business owners who once found that serving the expanding U.S. military was a path to affluence, defense reductions in the past two years -- and now the diminished threat to peace in Eastern Europe -- are signaling the end of an era.

Local defense contractors have laid off hundreds of workers, and analysts predict even more dramatic reductions are ahead. Some businesses are finding other ways to trim costs and are looking for contracts outside the military.

The fallout from defense cuts is beginning to ripple through the Washington economy, where military spending fell from $6.3 billion in 1988 to $5.9 billion last year, and is headed lower.

Some analysts said the layoffs of workers who routinely earned $40,000 or more a year have exacerbated a sluggish real estate market and are partly to blame for the failure of some retailers.

"That's been the engine that has driven this economy," said David Wallach, president of Wallach Associates, a defense employment agency, who has followed the industry for more than 20 years.

"All these government-related positions have built up this huge industry in the Washington area, employing these people. These people have bought cars, clothes and other things. If these people are being laid off, you're going to have a domino effect and you're going to see the retail business go in the toilet."

In the past few months, Raytheon Service Corp. in Crystal City trimmed 30 workers from its 110-person staff, most of them engineers who worked on combat systems for ships and submarines that were slashed from the Navy's budget.

McDonnell Douglas Corp., the nation's largest defense company and second-largest airplane maker, with a work force of 135,000, has announced that it will eliminate 14,000 to 17,000 jobs nationwide by the end of the year, including about 80 in the Washington area. And Lockheed Corp. closed a computer unit in Fairfax County last spring, consolidating it with the company's headquarters in California.

More than a dozen smaller defense firms in the Washington area also have announced layoffs or have told workers that their jobs will be eliminated once current federal contracts expire.

Some of those being laid off are highly skilled specialists who are being forced into lower-paying jobs, and others are being forced to change their careers.

A Fairfax man who managed the installation of military computers for a defense contractor said that after losing his $65,000-a-year job in November, he spent three months looking for work before settling on a position with a trade association that pays $45,000.

"My savings went from $16,000 to a little under $8,000," said the man, who asked not to be identified.

He said he and his wife bought a $300,000 house 10 months before he was laid off, and the monthly payment now is hard to meet.

"We used to go out to eat dinner every weekend," the man said. "We haven't been out in months. We are not saving any money."

During the past three or four months, "we've seen a lot of people scrambling," said Phil Odeen, managing partner of the consulting division of Coopers & Lybrand, a management services and accounting firm. "We've gotten so many resumes from people . . . . We're thinking about putting in a voice-mail system just to handle those types of calls."

Odeen, who also is chairman of the Professional Services Council, said he believes the worst is yet to come.

Next year, after hundreds of defense contracts with area companies have expired and not been replaced, "you'll see a lot more" defense professionals struggling for jobs, Odeen said.

Despite the anxieties, most local economic analysts believe the impact of defense cutbacks will be less dramatic here than in areas such as California, Texas and Missouri, where several major contractors have manufacturing plants.

Stephen S. Fuller, a George Washington University professor who has studied the effect of defense reductions, said that because only 4 percent of the area's economy is devoted to manufacturing, companies here should be better able to adjust to a shrinking defense budget than areas where manufacturing accounts for 15 to 20 percent of the economy.

Because most of the area's defense contractors are companies that provide services such as computer technology, consulting or research, most of them should be able to adapt to a world with fewer defense dollars by serving other government agencies and businesses, Fuller said.

"The companies with the greatest vulnerability here are the small specialty firms who don't have marketing departments . . . or the expertise to go after contracts outside the government," Fuller said.

The defense cuts are expected to hit especially hard in Northern Virginia, where 77.3 percent of federal contracting in 1989 was defense-related, according to a study by the Greater Washington Research Center.

Larry Gallagher, vice president of a small Alexandria firm that provides computer and consulting services to the Defense Department, said he already is beginning to feel squeezed by larger competitors.

"The big guys wouldn't bother going after a $2 million contract before, but they do now," said Gallagher, whose company, Stanley Associates, has not had to lay off any of its 70 workers.

"We've been fortunate because we began getting into other types of federal contracts two years ago . . . . We knew {the defense buildup} couldn't last forever."

Despite an increasing number of layoffs among defense contractors, the area's unemployment rate has remained relatively stable in recent months and in May was among the lowest in the nation, at 2.7 percent.

Some analysts said the stable unemployment rate indicates that many laid-off workers, particularly consultants, engineers, managers and other professionals, have accepted lower-paying jobs rather than face unemployment.

Some former defense executives, such as Bud Brien, are struggling to start their own businesses. Brien was an engineering manager for a Hunt Valley, Md., firm before he was laid off in April. Eventually, he moved to a beach community in New Jersey, where he restores old houses.

"I have questions and doubts about how long it will take to get a business going," Brien said. But if he waited for an upturn in the defense business, "I'd be chasing a rainbow that isn't there," he said.

After such cutbacks began to take business from his employer, Bob Salisbury also has started his own firm, helping minority-owned companies win government contracts. Now he is struggling to adjust to a life of lower expectations.

But his problems were compounded when his wife, an executive of a defense contracting firm, was laid off this year. She too has become a business consultant. Their income together is a third of what it was before.

"Our highest priority now is to get enough as consultants to make sure the house payments are made," Salisbury said. " . . . New clothes and new cars, those things are on the bottom of the heap, priority-wise.

"In three or four years, I'll be all right again. But it will take me time to refocus on things other than DOD."