Forget the Stock Market. Worry About Jobs

The depressed stock markets have dominated the news lately, as investors recalibrate their finances—and their lives. But it looks like there's more bad news on the way that could hit even closer to home.

The job market has gradually drifted out of the comfort zone this year, with the unemployment rate rising from 4.9 percent in January to 6.1 percent this fall. That's higher than what economists call the "sustainable" rate that's normal, more or less, as people move between jobs in a healthy economy. And suddenly it looks as though the job market will be the next pillar to quake as global economic tremors continue. Consider some of these recent projections—mostly downgrades—for the U.S. unemployment rate over the next year:

• International Monetary Fund: an average of 6.9 percent for all of 2009
• Moody's Economy.com: a peak of 7.3 percent late in 2009
• Goldman Sachs: a peak of 8 percent by the end of 2009

Those are steep numbers that ought to be getting more attention—and probably would, if the free-falling stock market weren't scaring retirees into applying for jobs at McDonald's. If Goldman's gloomy prediction is right, an unemployment rate of 8 percent would be the highest since 1983, a year that bracketed the worst recession since World War II.

Steep job losses also have a more direct impact on people's financial health than a sinking stock market. Most people live off the income from their job—not off unearned income from an investment portfolio. It goes without saying that layoffs cause pain at home and send shock waves through the broader economy. Homeowners struggling to pay their mortgages will be far more likely to default if they lose their jobs, leading to higher foreclosure rates and a deeper housing bust. In a weak job market, even those who stay employed get smaller raises—and sometimes pay cuts. People worried about getting laid off spend a lot less on cars, vacations, and even small luxuries, further depressing a broad range of industries. That could cause more layoffs. Dismal consumer attitudes end up being self-reinforcing, perpetuating a downturn.

The job market turned very sour in September, when the economy shed 159,000 jobs, the ninth consecutive monthly decline and a major drop-off from prior months. That's one big reason a majority of economists now expect a recession—and some of them, a steep one. "The U.S. recession will be significantly deeper than we thought earlier," Goldman now believes, with a weak economy expected for most of 2009.

Many economists believe a recession has already begun, so workers are starting to think about how to protect their jobs. Even some "safe" jobs now seem vulnerable. Government jobs are considered very stable, for instance—except that many states and municipalities are now expecting big revenue declines, since income and sales tax receipts are starting to plummet. Cutting payrolls is one obvious way to balance the budget. Even healthcare jobs, generally thought to be recessionproof, aren't as plentiful as they were just a year ago.

There are certainly ways to help protect your job. One is making sure you work in part of your company that brings in revenue, for instance, since "cost centers" like customer service, human resources, and various types of support are often the first to get cut during lean times. It's also a good time to make yourself as indispensable as possible, even if that means taking on extra work for no bump in pay; ask for a raise or promotion later, when your company starts hiring again. And you didn't read it here, but if there was ever an opportune time for brown-nosing, this is probably it.

Millions of Americans are also preparing for tough times, whether that turns out to be a job loss, delayed retirement, or a lower standard of living. Spending is down, which is bad for the economy but good for the average consumer's balance sheet. And consumers have cut way back on loans for cars and other purchases, choosing instead to pay down debts or hold on to their cash. Don't worry: There will still be plenty of stuff to spend it on later. It might even be cheaper.