(FORTUNE Magazine) – 'Right now we're seeing a huge gap between what I call the emotional economy and the real economy. The emotional economy is people's perceptions and expectations, based on what they read in the newspapers and what's happening to the stock market. The real economy is people's actual day-to-day experience."

So says Jeff Taylor, CEO of Monster.com, the mother of all online job boards. If there is an emotional economy, the prevailing emotion right now is anxiety--not just about the stock market, but about employment too. Apparently bracing for the worst sort of job-eliminating, opportunity-squashing recession, 30,000 to 35,000 people are posting new resumes on Monster.com every day. The board carries 8.4 million resumes now; Taylor expects that total to reach 20 million within a couple of months. Says he: "Lots of people are nervous--often more nervous than they need to be--so they're really thinking about their careers, and trying to plan and strategize, for the first time in years."

Those free-floating job fears aren't completely unfounded. After all, the economy is really rotten for the first time in a decade, and layoff announcements are hitting the papers with disconcerting regularity. The good news: The job market is still remarkably robust for the millions of Americans in managerial and professional positions. But there's also no denying that the best time to prepare for the worst is before it happens. That would be now. What follows is a short course in how to steer your career through a recession (assuming one officially materializes). We'll discuss the state of the job market, review the basics of career building, and provide some ideas on how you can protect yourself from layoffs--and tell you what to do if you fail.

So far there's less cause for worry than you might think. The Dow and the Nasdaq may have taken a huge beating, and some manufacturing companies may be trimming their sails, but studies show that the white-collar job market is still strong. Unemployment is holding steady at 4.2%, and in every sector except manufacturing, new hires in February outnumbered layoffs, 135,000 vs. 94,000. According to Allen Salikof, president and CEO of giant headhunting firm Management Recruiters International, the talent shortage that plagued employers during the go-go years simply has not gone away: "Many companies have a tremendous backlog of positions that they must fill--regardless of minor fluctuations in the economy--just to keep up."

"The sky is not falling," says David Opton, executive director of ExecuNet (www.execunet.com), a national online networking and career-development service for senior managers (defined as those earning upwards of $100,000 a year). ExecuNet's research shows that, for honchos pulling down $250,000 or more, demand soared 70% last year: "So even if the numbers turn out to have gone down a little bit in the first half of 2001, you have to bear in mind that it will be a decline from an all-time record peak." In other words, it's nothing to lose much sleep over.

So does all this mean that you can stop fretting about those ominous layoff announcements in the paper and keep doing business as usual? Well, not exactly. Nobody knows if or when a recession might set in, or how long it will last if one does. Meanwhile, the corporate restructurings, repositionings, mergers, and acquisitions going on left and right can alter your own professional landscape with terrible abruptness. "One thing I've learned is that you have to start getting ready to move on while you are still employed. Don't wait," says John Eifes, a stockbroker in Winston-Salem, N.C.

Eifes was bounced out of a senior management job at then newly merged RJR Nabisco in the mid-1980s--smack in the middle of the recession before last--and took quite a while to get established in a different career. He's doing fine now, but in retrospect he wishes he had acted more quickly: "After the merger things got very strange politically, and I knew it was not an ideal situation for me, but I let it go on. I was coasting. If you see changes around you that you don't feel good about, chances are you're going to be leaving soon anyway, so be prepared. Take the bull by the horns."

A good place to start is with an honest assessment of where you stand right now. "Often people get so absorbed in the day-to-day tasks and pressures of their jobs that they don't look up and see the big picture. Anyone doing that these days, especially in an industry or a company where layoffs seem imminent, is vulnerable," observes Tom Silveri, CEO of outplacement powerhouse Drake Beam Morin (www.dbm.com).

Silveri suggests that you ask yourself a few questions, beginning with this one: Do you know what you contribute to your company? "The best way to recession-proof your career--even if not your current job--is to consistently produce great results, solve problems, and find more efficient ways of doing things," Silveri points out. Question No. 2 is closely related: If your job opened up today, would you get it? Keep a record of your accomplishments. What terrific thing have you done lately?

Next, suppose your job disappeared tomorrow. What would you do? Silveri and other career gurus say that it's absolutely essential to keep abreast of trends and developments in your field, by reading trade publications, going to conferences, and joining industry groups. You're too busy, you say? Make the time. If you suddenly find yourself jobless, or tenuously employed, having already gotten up to speed on what's happening beyond your own four walls could shorten your next job search considerably. Even if you stay where you are, scoping out where your industry is heading--including what the competition is up to--can show you which skills you need to add to your repertoire to make sure you don't become obsolete.

Assuming you're happy where you are, the best way to make yourself invaluable to your employer is to demonstrate one skill that's needed everywhere and is in chronically short supply. "Without exception, among my clients the skill everybody's looking for is leadership," says Laura Berman Fortgang, president of InterCoach (www.intercoach.com), an executive-development firm in Montclair, N.J.

Notoriously hard to define, much less quantify, leadership really means the ability to "take on a project nobody else wants and make it work," Fortgang says. "You need a talent for persuading people to get onboard and achieve a goal. This is the stuff that adds value, and it is in great demand now. If the choice for a given job comes down to two people, both technically savvy, but only one of them is good at communicating and motivating others--that is the indispensable person."

You don't need to be a big shot to be a leader. In fact, it might help if you weren't even a boss. BTNovations (www.bt.novations.com), a human resources research group in Provo, Utah, recently polled 2,500 white-collar employees at large U.S. companies. Asked to name the colleagues who generated the best ideas and led the most innovation, 85% picked peers or underlings whose titles and job descriptions didn't include managing at all. BTNovations vice president Kurt Sandholz sees a leadership vacuum in many companies in which "key contributors can step up and make things happen." Be one of them, and you'll be as close to indispensable as it's possible to get.

But is it enough just to be really good at what you do, or would you be wise to engage in some political maneuvering as well? "I hate the word 'politics.' It has so many negative connotations," Tom Silveri says. "But, yes, you want to be part of whatever change is going on, not just waiting for it to happen. Raise your hand. Get involved. Market yourself and explain how you can contribute. There are people who are good at gaining real influence in a non-'political' way--and they tend to be very successful people."

Take Deirdre Macdonald. When Scottish Power, a big Glasgow-based electric utility, was acquiring PacifiCorp in 1999, Macdonald was sent to Portland, Ore., as part of the transition team responsible for making the merger hum. "I decided to make it a habit to meet one new person every week, either over coffee or lunch. I still do it," says Macdonald, now director of learning and development. "With 7,000 people at over 200 locations in six states, I didn't want to be seen as just a name on a memo--'Oh, that's somebody at headquarters.' I didn't want the PacifiCorp people to feel that I was this remote person saying, 'I have such and such a title [in the acquiring company], so you have to listen to me.'"

All those lunches and cups of coffee have paid off, along with other efforts to keep everybody informed of what Macdonald and her colleagues do. Even before the merger was final, for instance, her department wrote a series of articles for internal publication, describing training programs that were already up and running. As a result, Macdonald has become a go-to person throughout the company, her thoughts solicited on everything from community-development programs to IT investments. "These aren't areas where someone in my position ordinarily has much input," she says. "The point is, people will ask for your views and ideas--but first they have to know who you are."

True, which brings us to the dreaded N-word. Every career coach, every outplacement consultant, every formerly displaced executive who has ever landed on his feet after a layoff or other career setback, all agree on one thing: The best career insurance you can provide yourself, in flush times or foul, is to network, network, network. Personally I loathe this word, and I'm not the only one. "'Networking' is such an abused term, it makes people nauseous. It's come to be seen as going to a business event and trying to set a land speed record for collecting the most business cards from strangers," says David Opton at ExecuNet. "But networking doesn't have to be false or calculating or manipulative--in fact, it won't work if it is."

Instead, say Opton and others, networking is mainly about giving, not getting: "Ask yourself, 'Have I helped anybody lately?'" Why? Simple. Notes Opton: "Most people decide whose phone calls to return based on who's been helpful in the past." At ExecuNet's networking meetings, held regularly in 25 cities in the U.S. and Canada, participants are asked to focus their attention on how they might be able to help the other attendees, not vice versa--with the salutary result that everyone is likely to end up coming away with something but without having had to angle for it.

In these uncertain times, staying in touch with lots of people--former colleagues, old bosses, congenial folks you met at a conference or a party or somewhere--is well worth your time, and that is truer the higher up you go. Consider: The Bureau of Labor Statistics reports that fewer than 20% of all working Americans found their current job through a friend, relative, old school chum, or other personal connection. By contrast, among executives (defined as managers earning more than $100,000 a year), 72%--well over three times the average--landed in their current position thanks to an acquaintance they had cultivated at some point. Tom Borger, a former Xerox executive now living in Austin, Texas, has helped launch several lucrative startups, all of which came to him by way of a vast informal grapevine of old co-workers and pals, including a few who had become venture capitalists. "Keep up your connections with people," says Borger, "because to find the next great opportunity, you only need one of them. You just don't know ahead of time which one it is."

Now, let's say you're beginning to suspect that you might need that next opportunity, um, very soon. Nine times out of ten, being laid off has nothing at all to do with your own job performance and everything to do with the incessant turbulence in the larger world. (For a list of some of the companies that have announced the biggest layoffs so far this year, see "The Axman Cometh" table.) A few signs that layoffs are probably coming: Upper-level management is having a lot of confidential meetings. Middle managers are questioned more closely or turned down flat when they ask for more funding or staff. Your boss, at whatever level, is less and less willing to talk to you about the future or look you in the eye. Your company's senior management team has suddenly changed. A merger has been announced. Your company's stock price is falling, or its debt has been downgraded, or both. Senior people's attention has shifted away from competing in the marketplace and is now riveted on hacking away at costs. Wall Street analysts, and even the press, seem to know more about what's going on in your company than you do.

Of course, some harbingers of impending doom are far less subtle. A while back, in a discussion among FORTUNE Website readers (at www.askannie.com) about how they knew--well ahead of any official announcement--that the end was nigh, a reader named Neia wrote, "We knew the company would start letting people go when the leasing company sent a 'repo man' to pick up the keys to the corporate cars. They then threw a lavish Christmas party and laid off two-thirds of the staff a week later." Ouch.

So the ax has fallen on your neck. What now? Whether your layoff is involuntary or not--many companies will offer a severance deal that volunteers can take or leave before the bosses start issuing pink slips--the basic strategies for negotiating a severance package are the same. And, yes, you can negotiate. Why would your employer want to work out terms with you once you've already been canned or are about to be? Paul Tobias, chairman of Cincinnati-based National Employee Rights Institute (NERI), suggests that you consider that you are selling three things here: A release that says you won't sue the company, which most employers these days want you to sign; a "nondisparagement promise," either implicit or explicit, meaning you won't muddy the recruiting waters by badmouthing the company to outsiders; and a guarantee that you'll go quietly, without possible damage to morale among remaining employees, not to mention customers and other important bystanders. (By the way, if you see a layoff in your future, do yourself one big favor and get a copy of Job Rights & Survival Strategies: A Handbook for Terminated Employees, available from NERI at 800-469-7374. It's a gold mine.) Particularly if you're one of a relatively small group of people leaving, or if you're fairly senior in your area, you probably have more bargaining power than you think.

Don't sign anything until you've had a chance to think it over and do some homework. Take a look at the employee manual to see what it says about your company's severance policy, but keep in mind that many manuals now are seriously outdated. "You don't want to be limited by a policy that may have been set 20 years ago," says Richard Bayer, chief operating officer of a national career-counseling organization called the Five O'Clock Club (www.fiveoclockclub.com). Bayer notes that a standard severance formula used to be one week's pay for each year of service, which made sense in the days when plenty of people worked for the same company for a couple of decades or longer. But now? "We had one client who, as soon as he was hired, had to uproot his family and move from one coast to the other. He got laid off after three years, and the employer wanted to give him three weeks' pay," Bayer recalls. "We said, 'Whoa!' and helped him negotiate four months' salary, which was much fairer."

Often, getting a better deal bears an odd resemblance to asking for a raise. Having done a thorough inventory of your own accomplishments, as recommended earlier, can really come in handy here. Says Bayer: "If the company offers you an amount that you don't think is enough, and they defend it by saying, 'Well, this is what everyone else is getting,' then you have to be prepared to show why your contributions rate special consideration." Sometimes, though, money isn't even the main issue: See the sidebar "You're Being Laid Off--Now What?" for a list of other severance-agreement items that you can and should negotiate.

How can you tell whether you need a lawyer? Refreshingly, many employment attorneys aver that you usually don't need them at all--and may in fact fare better on your own, since hauling an attorney into the discussion strikes so many bosses as, um, unduly antagonistic. Says Janice Goodman, a prominent labor lawyer in Manhattan: "If you see clear evidence of age, sex, or race discrimination, you might want to call a lawyer. If the company wants you to sign a noncompete agreement, you might seek legal advice, because this is a very contentious area right now. If there is anything that is written in such dense legalese that you don't understand it, do ask a lawyer to review it and explain it to you. But absent any of these things, you're better off without us."

Bill Hollett, a vice president at Drake Beam Morin who has helped plan and execute hundreds of layoffs over the years, has collected a vast file of separation agreements that "range all over the place, from two pages long to 35 pages," he says. "My rule of thumb is simple: The longer your agreement is, the more dangerous it is." Signing something 20 pages long? Show it to a lawyer first--just to be on the safe side.

Age discrimination, incidentally, is far easier to prove (and disprove) now than it used to be. A federal law called the Older Workers' Benefit Protection Act, passed in 1990, says that in any layoff of two or more people, the company must disclose the ages of those who were selected for termination and those who were not. "Some employees get really angry about having their ages revealed," notes Alan Koral, a partner at Vedder Price Kaufman & Kammholz in New York. "But this does make it much easier to spot suspicious patterns."

Getting laid off is a shock. It's demoralizing. And it's scary. At the risk of sounding insufferably Pollyanna-ish, however, let me say this: If you have to lose a job, there has never been a better time to do it. That's due in large part to the still-thriving job market, of course. At least until we slide into a truly nasty recession (if we ever do), you have a pretty good shot at landing a sunnier spot than the one you're leaving. Moreover, Steven Berglas, a psychologist who teaches at the Anderson School of Management at UCLA and who has counseled hundreds of laid-off executives in his private practice, says that losing a job now "entitles you to a free pass, in society's eyes. It's not you, it's the new economy, it's the stock market. The stigma is gone--and the social support, what with pink-slip parties and so on, is enormous."

Berglas urges you to see your suddenly available status as a chance to repackage yourself: "Think creatively about what you want to do next. Search out new ways to use your old skills." And don't limit yourself to the same industry you've been working in. According to a new study by career-management consulting firm Manchester (www.manchesterus.com), about 45% of managers who were recently laid off by banks, telecommunications, and health-care companies are finding new positions in fast-growing high-tech and information-technology companies, whose appetite for fresh talent seems insatiable.

There's no question that more resources are available for job-hunting managers now than were dreamed of during earlier economic slowdowns, when the Internet was embryonic. Until fairly recently most job boards and other online career services were designed to cater mainly to techies and entry-level employees, but that's changing fast. A recent poll of 753 laid-off executives by headhunting behemoth Lee Hecht Harrison (www.lhh.com) found that 97% now use the Internet to do research on employers, and 76% post their resumes online. Predictably, some heavy hitters in the executive recruiting game are stepping in to help. Spencer Stuart just launched Spencer Stuart Talent Network (www.spencerstuart.com), an online job-search and career-development service exclusively for managers in the $100,000 to $250,000 salary range. Last September, Monster.com started Chief Monster, a confidential job board restricted to managers with titles of vice president or higher. So far, CEO Jeff Taylor says, 160,000 executives have signed on.

The luckiest among the laid off may be those who rode the bull market to a bit of financial security--and who are now in a position to think hard about whether they really want another full-time job at all. "So many of my executive clients are so unhappy in their work," says longtime executive coach Bill Morin. "People who get laid off tend to follow the initial impulse to run right out and get another job just like the one they lost. Sometimes it takes a year or two before they realize their mistake."

Or consider the obverse: Dave Corbett, head of a Boston executive-coaching firm called New Directions (www.newdirections.com), has seen lots of folks who, confronted with a generous severance package, "think they can't wait to retire and play golf all day. So they take the bridge to early retirement and move to Florida. Within a few months they're so bored, they come screaming back." He adds: "Tens of millions of baby-boomers will be facing this dilemma before long--decades of active, healthy life ahead of them, with no desire for a 60-hour-a-week job, and yet a real aversion to the idea of 'retiring.'"

Corbett's solution is something he calls a "portfolio life." Simply put, it's about engineering a life for yourself that includes enough work to keep you stimulated and enough leisure to keep you whole, with a couple of long-neglected passions (organic gardening, playing the bagpipes, tutoring inner-city kids) thrown in to keep you happy.

Finding the work part of this equation is getting easier all the time. Over the past decade a whole industry has sprung up around finding and recruiting part-time executives, sometimes called project managers or interim executives (not to be confused, please, with consultants). Companies like to hire limited-term expertise, especially now. In the past couple of months, Spherion (www.spherion.com), a huge human resources consulting company based in Tampa that specializes in this kind of matchmaking, has seen a 25% rise in demand from corporate clients for high-level short-term help, and that seems likely to continue. The last time the economy looked ready to take a little snooze, in 1997 (remember?), the firm--then called Interim Services--found work for 50% more contract executives than in the year before.

A portfolio life sounds great in theory, but who actually has one? Well, Stewart "Nick" Steffey Jr., for one. Now 55, Steffey spent 30 years in the insurance industry, ending up as chief operating officer of Cigna Worldwide and then CEO of Liberty Mutual Holdings, based in Sydney, before he was ambushed by a hostile takeover in 1998 and fired. What's he up to now? Funny you should ask.

Steffey is managing director of a little firm called Boston International Capital Partners, which invests in regional insurance companies that are "way below the radar screen of the big global insurers," and he's also mixed up in a couple of tech startups he's really excited about. That takes about half his time. The other half goes to the New England Shelter for Homeless Veterans and to a home for developmentally disabled adults on a farm in Columbia County, N.Y. He does coaching, cooking, counseling, weeding, hauling hay--and, for the shelter, some strategic planning and fundraising too.

"I was always on a lot of nonprofit boards and so on. Those tended to come with the jobs I had. But this is so much better, so much more hands-on. It's a tremendous joy and satisfaction," Steffey says. "But, you know, when I got laid off was the first time in 32 years that I ever really thought about what I was doing with my life. I never had time before. I used to spend 280 days a year on airplanes." Sound familiar?

So if the downturn hits you where it hurts, try not to despair: Maybe you'll be led to a new career, to a future that's more balanced than the present you're slogging through now. As the old cliche goes, turn the challenge into opportunity. But if you'd prefer to avoid the challenge altogether, then don't forget where we started: Now's the time to make sure you've got the right career map.

FOR ADVICE ON STEERING YOUR CAREER THROUGH GOOD TIMES AND BAD, READ ANNE FISHER'S NEW BOOK, If My Career's on the Fast Track, Where Do I Get a Road Map? (WILLIAM MORROW, APRIL).

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