03/18/2010 05:12 am ET | Updated May 25, 2011

Media Struggles To Reconcile Dow Surge With Unemployment

Hey, kids! Did you get the funny feeling in the past 48 hours that the legal tender in your wallet felt a little more bald-eagley? There's a reason for that! Yesterday, the Dow briefly hit the magical 10,000 mark, and has been sniffing around that milestone for the better part of the day. We're back, baby!

And yet, wasn't it weird that those good feelings didn't prompt you to go out and spend that hard currency in reckless abandon? There's a reason for that, too. You don't have a job! So, when we say, "We're back, baby," the standard "supplies are limited, some restrictions apply, void where prohibited" disclaimer should be assumed to be in effect.

It's been fun watching the media grapple with the Dow Up/Employment Down phenomenon, though, as various anchors eye the statistics and quizzically wonder, "How'd that happen?" Well, U.S. News and World Report's Rick Newman has a simple explanation: the Dow's surge is, in essence, a juked statistic:

So are job losses good for the stock market? Actually, yes. At least for awhile. Stocks are rising because many companies are earning more money than analysts have expected. But earnings aren't up because companies are selling more stuff; most companies are still selling less stuff and grappling with falling revenue. Instead, earnings are rising because companies have cut their costs more than revenues have fallen. And "costs" are often the same as "jobs."

Newman pulls some earnings reports highlights from companies like Johnson and Johnson, Pepsi, and Alcoa, and finds the same pattern: revenue down, earnings up. And there's the rub:

All of those companies have laid off workers over the last two years, probably necessary to keep the company healthy. And it's worth keeping in mind that when earnings outperform revenue, it's a sign that the company is well-run (assuming there's no Enron-style hocus-pocus). But CEOs also know that you can't grow a company or keep juicing the stock price by cutting costs and slashing jobs. Real growth only comes from new customers, new business, and increased revenue. And on that measure, the outlook is murky for the stock and job markets both.

The same workers who have been getting laid off, improving the cost profile for many companies, are also consumers running out of money to spend. Some are going bankrupt, defaulting on bank loans, and losing their homes. That's a major risk to corporate profits--and stock prices--down the road.

Meanwhile, over at Fox News, Neil Cavuto has an issue! "What was once the Bush recession is now the Bush recovery... or is that a stretch?"


Is it a "stretch" to call this the "Bush recovery?" Not at all! Just don't forget to include the word "jobless!"

Why Stocks Are Surging as Jobs Disappear [U.S. News And World Report]
Fox News Talks Up 'Bush Recovery' [Washington Independent]

Dow Hits 10,000, Unemployment Nears 10 Percent

[Would you like to follow me on Twitter? Because why not? Also, please send tips to -- learn more about our media monitoring project here.]