Like nearly everyone in the working world, Mary Peterson, CEO of Retail Jewelers Organization (RJO), has come to expect less engagement over the past year from the more than 800 independent jewelers she works with. Fear of the stalled economy continues to keep potential shoppers at bay, which means retailers across the country—from giants like Best Buy and Home Depot all the way down to locally owned stores—are being forced to whittle down their workforces again in the first month of 2009.

It's not just the unemployed who are paying the price. Job losses are taking a serious toll on the layoff survivors and the organizations they still work for. A recent Accenture study found that 66 percent of managers believe that economic concerns are distracting employees and hampering productivity. After the last big recession in the early 1990s, organizational psychologists confirmed what managers always suspected—layoff survivors are less engaged, less productive and absent more often than before they saw the ax dropped on their work pals.

Survivors' guilt describes the syndrome infecting "the lucky ones" who escape layoffs when friends and peers don't, as well as the managers who served as executioners of job cuts. Uncomfortable questions like why them and not me? burden survivors. They are supposed to feel "lucky to still have a job," friends and family are quick to remind them, which only heaps on the guilt at the thought of colleagues who are not so lucky. Ironically, these pangs of remorse and murmurs of self-loathing don't make them work harder or cherish their jobs more. Guilt diminishes their performance and causes them to mentally retract from their duties.