Stocks have been flying lately -- and so have pink slips.

The

Dow Jones Industrial Average

hit a record high last week, finally moving past a peak set way back in 2000. Spirits on Wall Street have been buoyed by falling oil prices, which investors expect to boost earnings by easing costs.

But the big stock indices aren't the only numbers on the rise lately. U.S. layoffs surged 53% in September, according to a survey. And with corporate America's annual year-end firing festival looming -- December and January typically rank as the top downsizing months -- the fourth quarter could be ugly.

A rising layoff toll could complicate matters for investors, who are already struggling to sift through mounds of conflicting data on the direction of the economy and the strength of companies.

For even as stocks have hit their high note, recent weeks have bought cutbacks at

Ford

(F) - Get Report

,

Whirlpool

(WHR) - Get Report

and

Intel

(INTC) - Get Report

, for starters.

"The layoffs suggest that the economy has downshifted into a lower gear, growth is slowing, and more companies are struggling," says John Challenger, chief executive of outplacement Challenger Gray & Christmas, which does the layoff survey. Challenger says September's 100,000 U.S. job cuts were the most since January.

Executives came back from summer holidays to find the economy has slowed. Annualized gross domestic product growth has fallen to an estimated 2.3% for the third quarter from 5.6% in the first quarter. Economists blame the cooling of the housing market, which has produced so much income for consumers in recent years.

Still, the economy continues to grow, and the U.S. has been adding jobs. The government said Friday the economy added 51,000 new jobs in September. That's a weak number -- but at the same time, the Labor Department revised past payrolls data to add 810,000 jobs over a year. Unemployment is running at 4.6% -- what many economists call full employment.

"If companies are worried about a hard-landing in the economy, they don't start by laying off people, they just hold back on hiring," says Ethan Harris, chief economist at Lehman Brothers. "Making layoffs is a much bigger decision."

The economic big picture aside, executives are feeling pressured to produce rising profits. And while 2006 has so far brought 18% fewer layoffs than 2005, the ax has been swinging overtime lately at companies both healthy and sick.

Many observers would put Detroit's Big Three firmly in the latter camp. Nearly a third of September's cuts were doled out in the auto industry, according to Challenger, as automakers and parts suppliers feel market share losses.

Technology and telecom industries represented the second- and third-largest sectors reporting layoffs, according to the Challenger survey. There, even highly profitable companies like

Dell

(DELL) - Get Report

and Intel have been retrenching in a bid to boost earnings and regain their competitive edge. Intel alone set plans to fire 10,500 last month.

Still, economists say companies' flexibility to fire unneeded workers is one of the American economy's strongest features, so investors are loath to sell stocks simply because of layoffs. Indeed, firings are often applauded as showing management is aware of its challenges.

Perhaps that's why the surge in September layoffs was little noted among stock investors.

"There is a lot of pressure to take action, get the house in order, and that means cutting costs if sales or revenues are not so good," Challenger says.

In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click

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