Are you or a loved one worried about getting laid off? If you've recently been fired, how worried are you about finding a new job?

These seem to be two key questions today for economists and stock market analysts, as the answers have everything to do with how much you are willing to keep borrowing for expensive stuff like cars, houses and refrigerators -- as well as how much employers are willing to spend on new corporate networks, software and computers.

If you're worried about being fired, the reasoning goes, then no matter how much the

Federal Reserve cuts the target for short-term interest rates, you aren't likely to buy a new home, much less a summer place and a new truck to carry you there in style. And if your company is about to lay you off, it's probably not going to buy a new PC for your desk, much less additional data storage to hold all of your brilliant contributions to shareholder value.

Expectations for a dramatic slowdown in borrowing and spending by fretful or fired workers would have dire consequences for the stock market's nascent recovery, and that's why these issues are battlegrounds for bulls and bears. The

Department of Commerce

reported Monday that personal spending and incomes rose ever so slightly in March, but purchases of big-ticket items contracted sharply. Investors immediately interpreted both the bad news and good news as good news, sending stock prices up on the countervailing theories that weakness would encourage the Fed to cut rates again, and that strength would lead to a lasting recovery in earnings.

To be sure, good feelings were also spilling over from Friday, when an

unexpectedly strong government report on first-quarter

gross domestic product growth of 2% showed in the fine print that companies had

massively liquidated inventories in the period to the tune of $62.8 billion. Optimists believe that empty feeling on industrial shelves sets the economy up for considerable improvement over the rest of the year as companies order lots of parts and finished goods again -- especially if they're doing the work with thinner payrolls and thus fewer expenses to pay.

Because bulls usually get all the ink, let's look a little closer at the naysayers' case.

Summer Spending Recession?

Leading the charge for pessimists on the job front continues to be

ISI Group

, the team of forecasters headed by Ed Hyman, dean of Wall Street economists. In its report to subscribers on Monday, ISI contended that enthusiasm over GDP growth should be tempered with concern that

initial unemployment claims rose to a level 36.3% above the comparable period last year, right in the range it has hit in past recessions. In absolute numbers, the figure was an all-time high of 400,000 initial claims and still rising -- "a major deal" in ISI terms because the numbers show few signs of abating.

In addition, ISI points to the three-month average for help-wanted ads: It's down 20.2% year over year. Help-wanted ads tend to lead, not lag, payroll employment in the country -- and bottomed in 1991 at a one-year change of around minus 31%. Plus, layoffs are surging. In the past couple of months, pink slips were hitting desks at a rate of 50,000 a week. The figure last week was a whopping 54,510 to be exact, at companies from A to almost Z -- that is, from chipmaker

Agere Systems

(AGR.A)

-- 2,000 fired -- to truck-trailer maker

Wabash National

(WNC) - Get Report

-- 500 fired. Compare that with layoffs of about 10,000 a week in recovery periods like 1993. If that's not bad enough, just wait until another vast crop of kids graduates from college and high school next month and starts pounding on closed doors for jobs.

ISI is quick to note that layoffs and hiring freezes are striking far and wide in the economy, not just at technology companies. Its analysts observed that

Sara Lee

(SLE)

announced last week that it would cut an additional 1,400 or so employees in its underwear division in addition to the 7,000 previously announced layoffs companywide. The reason: sluggish demand for hosiery and lingerie, presumably because fewer women are going to work or out on the town.

Another tell for the economists: In its earnings report last week,

Starbucks

(SBUX) - Get Report

took the froth off its 2001 forecasts with remarks that it believes consumer spending is losing steam. No doubt some of the declining ardor for luxury items like Wonderbras and frappuccinos stems from higher energy and electricity prices, which after a brief period of stability in recent weeks are expected by futures traders to soar again by summer.

General Electric

(GE) - Get Report

CEO Jack Welch must be looking at the same figures because he reportedly told analysts last week that he believes the country faces the worst consumer recession since 1980, and that the brunt of the spending washout will occur this summer. Europe appears to be following the same schedule. The German government on Friday radically trimmed its forecast for economic growth to about 2% from 2.75%. That was coupled with new layoff announcements from companies as disparate as German industrial heavyweight

Siemens

(SI) - Get Report

, French appliance maker

Moulinex

and Dutch food conglomerate

Unilever

(UL) - Get Report

.

Finally, Karina A. Mayer, a managing director at ISI, says investors should be wary of the euphoric reaction to the 2% GDP growth figure because most of the advance came from statistical quirks related to the decline in demand for imported goods and a sharp increase in U.S. aircraft sales overseas. She prefers to stress that consumers are borrowing at an unprecedented, breakneck pace to maintain their spending binge -- and that the GDP report showed the annualized rate of spending by U.S. companies on technology-related capital equipment fell 6% in the quarter, a dramatic decline. "Tech activity is melting. We do not see a bottom yet," she said. "We think we're approximately midway through the downleg, not near the trough."

A Silver Lining

What about the four big interest-rate eases by the Fed -- not to mention its hard shove on the money supply tap known as MZM, or "money zero maturity"? Well, Mayer says the nation is still experiencing the lagged effects of the interest rate-tightening cycle of 1999 to 2000, not to mention the energy shock. Rates typically lead activity by 12 months, so ISI isn't expecting a sustainable pickup in business until at least a year following the start of the global interest-rate easing cycle in December 2000. Second-quarter earnings for the

S&P 500

are expected to be down a hellacious 19%, after declining 8.7% in the first quarter of 2001, and 8.7% in the fourth quarter of 2000.

Too pessimistic? There is a silver lining on this dark cloud. As you have undoubtedly heard a dozen times by now, history shows that stock prices tend to rise roughly five to six months before a resurgence in business activity and a revival in earnings -- so if the ISI timetable is right, a final bottom ought to be in prices by summer (after another big Fed rate cut), if it's not in already. "Investors' expectations are way ahead of economic reality," a bearish, but pragmatic, hedge fund manager told me last week. "They think a few cuts in interest rates will work like magic. They won't. Inventories are falling, and that's good. But demand isn't growing. And without the demand that higher employment brings about, business growth is going nowhere and stocks will be choppy."

In this scenario, deep cyclical companies and ones tied to commodity prices -- e.g., paper and chemical manufacturers, aluminum smelters, as well as railroads -- can continue to see their shares trade well as investors discount their eventual recovery. And conversely, still-cheap companies in cycle-proof industries such as hospital management, drug distribution, tobacco manufacturing and electricity production can see their stocks succeed as safe havens. But until employment begins to tick back up, it might be wise to tread lightly on tech and consumer stocks with high

price-to-earnings ratios because their prices are radically out of sync with their underlying growth prospects for the next six to 12 months.

Just in case you think I've gone too bearish, here's something that SuperModels fans everywhere have been waiting to hear since January. My modest timing model, which simply requires the

Nasdaq Comp

15-day moving average to move above its 50-day moving average, turned positive on Friday. I expect to post a new SuperModels portfolio to my Recommendations list soon.

At the time of publication, Jon Markman owned shares in the following equities mentioned in this column: Cisco, General Electric.