I'll give you some positive insight:
1- People with senority costs more money to the company! Some times, when there is a financial crisis, it makes more sence to get rid of the "expensive employee" than the new ones that cost less.

2- The fact that your boss contributed to set up the department is great, my question would be, what is his current contribution since the department is already set up, would he be considered a key emloyee now that "setting up the dept" is already done?

3- Your boss and you are not the only choices when it comes to thinning down the payroll cost. I bet you there are other positions that are not quite as critical.

I am sure the waiting is hard, but don't worry too much. Being new may be a good thing for you. (you are probably one of the ones that costs them less!)

gab