By Joseph A. Giannone

NEW YORK (Reuters) - Investment bank Morgan Stanley (MS.N: Quote, Profile, Research) says it is done cutting jobs and is going back on offence, spending some of the $1 billion (504 million pounds) it saved slashing 4,800 jobs in the past year to recruit top bankers and traders.

Like most banks, Morgan Stanley has been nursing wounds suffered during the breakdown of debt markets last summer. The firm, which has recorded $14 billion of write-downs, cut its staff by 10 percent in January and April while reining in trading risk and conserving capital.

But lately Morgan Stanley Chief Executive John Mack and other top executives became convinced that the firm had cut enough, said spokeswoman Jeanmarie McFadden.

"We feel that right now, for these markets, we are right-sized," she said.

Mack saw the continuing turmoil on Wall Street and layoffs among competitors -- 75,000 jobs eliminated so far -- as a rare opportunity to recruit some prized bankers, traders and risk management executives.

Morgan Stanley expects that making these hires now, when there is reduced competition for talent, will help it profit when markets eventually recover, she said.

In the past few days, Morgan has hired seven executives to strengthen its derivatives, commodities, restructuring and investment banking businesses.

Morgan Stanley shares are down 26 percent so far this year, which means that they're doing slightly better than the sector as a whole as measured by the Amex Securities Broker Dealer index .XBD.