Last month the national unemployment average rose to 9.8%. It’s actually at 17% if you count distressed and underemployed workers. Not only is unemployment data weak, it’s getting worse. Former Fed chairman Alan Greenspan said unemployment would hit at least 10% before turning back.

Even with this well-known data, the market is going up. The S&P 500 is sporting a mostly gentle uptrend from March to October. The market thinks we’re recovering. Bernanke and company have said as much. However, given that we have the toughest job market in a generation, to me it seems a little premature to declare recovery – at least a strong one.

I’m not alone in my assessment.’s Editor At Large Paul LaMonica recently said, “Repeat after us. There is no strong recovery without job growth. There is no strong recovery without job growth. Why does Wall Street not get that?”

A good question. Why is the market going up while jobs are going down?

It makes even less sense when you consider the nature of unemployment. It goes back to demand. When companies experience demand for their products and services, they will seek to meet that demand. If meeting that demand requires more labor, they will hire. It’s ECON 101. If companies hire, then unemployment goes down. People return to Starbucks to order their Double Skinny Lattes.

But that’s not what is happening. Instead, companies are cutting jobs. Why does the market go up while this is happening?

To this humble market observer, it seems that most of the buying pressure is coming from earnings. Quarterly profits have been good, often better than expected, primarily driven from falling operating expenses. Operating expenses are falling because many large companies are…you guessed it…cutting jobs. There are other factors, but job cuts are definitely helping the bottom line.

In recent days, Sun Microsystems (JAVA), The New York Times (NYT), Dell (DELL), St. Jude Medical (STJ) all shed jobs to stabilize their businesses. And these companies aren’t even banks. We just crossed the 100 barrier for failed banks in the US this year. I’m not sure where all those employees have gone, but they aren’t helping keep unemployment rolls under 10%.

Despite the slumping jobs market and rising stock market, I am often reminded of economist John Maynard Keynes’ aphorism. “The market can stay irrational longer than you can solvent.” This may be one of those times.