Fears about job security have the all too human effect of turning spenders into savers, though in emerging Asia, where shuttered factories multiply by the day, being too scared to spend could prolong the recession.
The financial crisis has triggered the slow unraveling of a huge imbalance between the world's consumers, mainly in the West, and the savers in the East.
U.S. consumers, who spent beyond their means for years on borrowed money, have been rediscovering thrift, with personal saving rates rising for a third month in November.
And the potential for more job losses in Asia, where the slowdown only really began in the second half of 2008, will keep Asia's consumers from reaching deep into their savings.
In the near term, they may even save more.
That means bets on developing Asia like China, where the urban jobless rate is at a 2-1/2-year high, becoming a big force for consumer demand are too early and a more balanced, sustainable path for global growth is distant.
"As long as you have the trend in unemployment continuing to worsen, it would tend to have a pessimistic effect on sentiment in the wider market," said Tahnoon Pasha, head of Asian equities investments with Manulife Asset Management in Hong Kong.
"What we will likely see is that savings rates will rise quite spectacularly," said Pasha, who has been looking for bargains in the cyclical and financial industries.
He said industrials and materials were the most vulnerable to what will likely be a weak global economy this year.
Despite a dismal growth outlook, those sectors have been the best performers since the MSCI Asia-Pacific ex-Japan stocks index hit a five-year low late in November 2008, suggesting they have been trading on valuations more than economic fundamentals.
Consumer spending-related shares have been the biggest underperformers, reflecting scepticism about investment bets on the emergence of the Asian consumer.
LAGGING INDICATOR
Getting a clear picture of employment across emerging Asia is not easy though because of varying data collection practices — India and Indonesia only release unemployment data once a year — as well as the sheer size of the informal parts of the economies, where transactions are in cash or even barter.
Still, based on private surveys and anecdotal evidence, job cuts have only just started in Asia. The registered urban jobless rate in China, which excludes migrant workers and farmers, rose for the first time in five years in the final quarter of 2008, to 4.2 percent.
Economists at HSBC expect unemployment in Asia excluding Japan to rise more than a full percentage point this year to 5.9 percent, with Hong Kong and China accounting for most of the increase.
They also expect consumer spending as a share of gross domestic product to fall to a seven-year low before recovering only slightly next year.
"We're seeing retrenchments rise and those will intensify as 2009 progresses. We'll probably continue to do so after the turn in the economies as well since employment is a lagging indicator," said Robert Prior-Wandesforde, the bank's senior Asian economist in Singapore.
Restoring confidence in labour markets also depends largely on how quickly and effectively governments can build institutions such as pension systems and unemployment insurance to protect workers.
CASTING SAFETY NETS
Stephen Roach, chairman of Morgan Stanley in Asia, said investors should buy anything related to the Asian consumer, but only after governments set up these kind of institutions.
"Given the massive layoffs that have occured in China due to the reform of state-owned enterprises, a safety net is really, really important to temper the fears of incoming job insecurity that have resulted in very high and excessive levels of fear-driven, precautionary saving," Roach told journalists in Hong Kong.
One of the biggest differences between job markets in Asia and industrialised economies elsewhere is the availability of more social safety nets.
Without them, laid-off workers are more likely to join cash-based parts of their economies and remain vulnerable to ups and downs in business cycles, said Gyorgy Sziraczki, senior economist with the International Labour Organization in Bangkok.
Sziraczki said policy measures in countries like Singapore and Thailand to moderate wage growth would curb unemployment but at the cost of reducing purchasing power. He noted that fiscal stimuli in Asia, including China's, have all lacked a specific target for employment.
"It would be useful when a country is designing stimulus packages that they think about what it means for job creation."
For a country as populous as China, social stability has become a primary policy objective as economic growth drops and millions are out of work.
So far, China's 4 trillion yuan ($585 billion) effort to support the economy has been geared towards infrastructure.
Yiping Huang, chief Asia economist for Citigroup in Hong Kong, said in a blog posting that a more direct approach to achieve stability and boost consumer spending would have been to create an unemployment insurance system.
"If low-income households receive better income support and migrant workers become entitled to unemployment benefits, then it wouldn't be that devastating even if growth dropped below 8 percent. In fact, because that would improve social security and income distribution, it should also boost consumption over time."
