In early August, a monthly update of persisting high unemployment triggered a stock-market rally. So why was more bad news on the job front good news for investors?
Because they knew that negative economic report would motivate the Federal Reserve to keep pumping $85 billion a month into the economy - and to keep interest rates low.
But on Dec. 19, the market again surged upward. And this time, the steep rise was credited by financial experts, at least in part, to a drop in unemployment.
That's progress indicative of growing confidence in the economy's ability to sustain a strengthening recovery.
Yes, the "dismal science" of economics (Thomas Carlyle coined that apt description in the 19th century) is frequently confusing.
However, this much is simple: Most Americans rightly prefer unemployment declines to unemployment climbs.
Many Americans also have been rightly wary that the Fed has significantly raised the "quantitative easing" stakes. Under that program, which aims to boost the economy with fresh infusions of cash, the central bank has been buying $85 billion of treasury bonds each month since September 2012. That's more than $1 trillion a year.
Federal Reserve Chairman Ben Bernanke has said all along that the central bank would reduce that spending spree once the economy picked up.
So when the Fed announced on Dec. 18 that the long-sluggish recovery had finally picked up enough steam to warrant reducing the pump-priming rate to $75 billion a month, it was a welcome sign of better times to come.
As Chairman Bernanke put it: "The economy has been expanding at a moderate pace and we expect that growth will pick up in coming quarters and waning fiscal drag."
Another welcome indicator came on Dec. 20 when the U.S. Commerce Department revised the economic-growth measure of the third quarter (July through September), initially estimated at 3.6 percent, to 4.1 percent.
Still, as Chairman Bernanke had pointed out two days earlier:
"The recovery clearly rings far from complete with unemployment still elevated and with both underemployment and long-term unemployment major concerns. We have seen declines in labor force but also the discouragement on the part of potential workers."
Indeed, labor-force participation (the percentage of working-age Americans who either have or are seeking jobs) remains near historic lows.
Mr. Bernanke also said that this year's official inflation rate of 1.2 percent needs to move upward toward the committee's 2 percent objective. He has warned that if it remains too low, it could restrain consumer spending and capital formation.
Many Americans, especially those who regularly shop for groceries, would dispute the notion that we need higher prices. Many Americans also remain justifiably concerned that despite the looming reduction of Fed bond buying as of next month, it will still, in effect, be printing $75 billion a month that we don't really have.
And keeping the economic ship afloat with an unprecedented scale of "quantitative easing" bond purchases is, by Mr. Bernanke's own admission, a short-term measure. Interest rates near zero also can't last forever.
Over the long haul, as the chairman has repeatedly stressed, Congress must implement stable budgetary policies that avoid short-term shutdown and debt-ceiling crises and produce long-term fiscal health.
That makes the bipartisan budget deal passed by the Senate and signed by the president last week a welcome, though small, step in the right direction.
Critics can fairly fault some of Mr. Bernanke's decisions as Fed chairman - including that massive bond-buying program. Janet Yellen, virtually assured of Senate confirmation as his successor after the new Congress convenes next month, is bound to have detractors of her own once she starts making the high-stakes calls required of the Fed chairman.
However, even when operating at peak efficiency, the Fed can't administer magic tonic for what still ails America's economy. That's a job for the free market, which can't fully thrive while the business community remains bewildered, and overly burdened, by government red tape.
And ultimately, the responsibility for facilitating wide-ranging prosperity lies with our elected leaders in Washington - and the voters who send them there.
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