With Unemployment Report, Reality Sets In

NEW YORK (TheStreet) -- As far as so-called psychological barriers go, unemployment rising to more than 10% is a big one.

A couple weeks ago, as "Dow 10,000" hats began circulating on trading floors, investors' mood was upbeat. Now as the Dow Jones Industrial Average struggles to hang on to that level, anxiety prevails. The latest picture of employment in America suggests that the bull market was premature, and the recovery may unfold more slowly than originally thought.

The unemployment tally swelled by 190,000 in October, and the jobless rate jumped to 10.2%, a 26-year high. As joblessness continues to rise, the longer it will take the economy to return to normal. The severity of the losses may be decreasing, but until companies add jobs, the situation won't improve. This is yet another case of less bad not equaling good.

Consumer confidence will suffer the most from higher unemployment. As news headlines alerted Americans to the fact that jobs are still being lost, few will feel comfortable spending, regardless of whether they have the money. Until spending resumes, it will be difficult to pull ourselves out of this funk. And that will lead to further job cuts. It's a vicious cycle that may take several months to break.

Curiously, the stock market has been up and down today. Bond yields have been falling, however, as some investors run to the safety of government debt. General Electric(GE Quote) is up about 6% on an analyst's upgrade, leading the charge. Joining GE in the push higher is Halliburton(HAL Quote), which beat third-quarter earnings estimates.