When I took on my first manager's job at a company bleeding red, I had to lay off my nephew. His wife was 7 months pregnant with their first kid. It never gets easy, especially when the person is productive and you know when things pick up you won't be able to bring them back as they have another job or have moved.
It's a big part of the reason I turned down the manager's job where I am now. Too old and tired to look in the face of a valued, good, productive employee with kids that run to your desk to say 'hi' when they stop by the office and have to tell them to pack up their stuff.