What should we do?

So with the news of Phil's office laying off two more engineers (one senior and one at his level), it makes me wonder if we should put this debt snowball on hold. I know that I've mentioned it before, but they have laid off 3 1/2 people since the end of last week, when the memo came out about layoffs, and Nashville was NOT on the list. I wonder if they just closed all those other offices? Long story short, his boss said that the office is now at the break even point, but my question is for how long? Should Phil be looking for another job? Should we be saving all of our money?

Those of you that have been through FPU, I'm the woman and I want to save money, espically when times are hard. That fully funded emergency fund is looking rather pretty at the moment, unfortunately we don't have it, we have a baby emergency fund of $1000. And I know I'd feel stupid if Phil never looses his job, and we wasted money in an efund, but I think we'd be really grateful for it if something does happen, and we need the money. One of those hindsight is 20/20 things, but unfortunately I can't jump ahead and see what is going to happen.

I just wish the economy would jumpstart and get going again. The past few months has really started to hurt people, and I'm so afraid that we're next. Especially with a baby and a lease and bills... its getting really scary out here. I wish Phil didn't have this Clarksville job, so that I could get a job at the local Kroger or something for nights and weekends. We'd have a lot more money for our debt snowball and/or money to save. But with him gone all the time, I could only work nights, and thats not goint to happen. But at least he has his job!!!!

Any and all advice is welcome. Should we continue with our debt snowball and only $1000 in a baby efund? Or should we put it all away to save? Or do some of both?