Firs things first: yes, you should look for a new job now. The other answers already got into detail about this, I won't repeat it here. Just in case you do not find a good job when they do lay you off or close shop:
I was in a similar situation a few years ago. This is what helped me, maybe you can pick a few points that apply to your situation and will help you as well:
If you are on good terms or maybe even friends with your colleagues that also lost their jobs, you have hit a jackpot: the company just provided you with your very personal "I lost my job" support group. A whole group of people going through the same things you go through. And they already know you and your situation. The next few weeks, they will have the same problems you have: who do I have to call at the Arbeitsamt? How do I write a Bewerbung? What form to fill for Insolvenzgeld? Which photographer to pick for shooting the Bewerbungsphotos? Can a lawyer help me with the Abfindung? You all have the same problems and you can share your solutions. For example we found a lawyer that would charge us only once for counseling even though we were 5 people because we all had the same story and no secrets and he could counsel us all in one meeting. We shared our experience with photographers and we read each others' CVs to improve them in terms of both spelling and contents. We all searched for jobs and when we found an ad or a connection that had a job that would fit our references but wasn't what we wanted, we would tell the others about it, because they were qualified and maybe they liked it better. When you are laid off you suddenly have a lot of time on your hands and all others are still busy as hell with their own lifes and jobs. But there's your personal support group. They do have time. If you can make it work, it's very helpful. I would have probably made it without them. But certainly not in that a good mood.
A job is giving life a structure. It's providing a routine that is suddenly gone. The first thing you should do is get a new routine for yourself. No matter what it may actually be, finding the time to go for a morning run at 07:00 or maybe reading the newspaper every morning or maybe watching your favorite episode of whatever on tv at a fixed time. But get a routine. With lots of time and nothing productive to do it is easy to slack off. Don't even start.
But there is more. A job gives your day a kind of definite end where you know all is done and you can relax. When this end is gone, make sure you create an end of your own. A definite point in time where you sit back and relax without feeling guilty. If you need to write applications, it's hard to relax, because you could. It's not like work where you couldn't work anyway if you are on the couch at home. You could write another application. You could surf the net for another job opening. Make sure you do this, but also make sure you find an end for your day where you can stop doing it without feeling guilty about it.