According to conventional wisdom, last week’s strong employment report should have alleviated any remaining fears of a “jobless recovery,” as the 321,000 new jobs created in November was more than 40% higher than the consensus estimate. Additionally, the quality of new jobs was greater than the typical seasonal retail positions that tend to proliferate at this time of the year. Instead, there was a big increase in jobs in the Professional and Business Services category, suggesting that large corporations are now investing in human capital again instead of just technology and outsourcing.

For the past three years, as the Fed’s Quantitative Easing program has driven the stock market to record heights, critics argued America was experiencing a “jobless recovery” that failed to bring down the unemployment that was persistently hovering around 8%. However, the past six months have witnessed a steady decline in the unemployment rate, now at 5.8% for the second straight month. That’s still higher than the arbitrary rate of 5% that many economists regard as full employment for a healthy U.S. economy, but below the 6% figure that is now associated with the “new normal” economic paradigm gaining wide acceptance.

But either way you look at it, it is difficult to consider last week’s labor report as anything other than very good news unless it is construed by Fed governors as too much good news, and motivates them to push interest rates higher sooner than expected. If they do begin nudging rates higher, investors may wonder if the bond market will remain stable, or will panicky sellers compound the problem by dumping bonds at fire sale prices?

It’s that fear of an uncontrollable “domino effect” that appears to be roiling the stock market this week. The lower bond prices fall, the higher their corresponding yields. The higher bond yields rise, the less attractive stock dividends become. And the less attractive stocks become, the more likely shareholders are to dump them in favor of higher yielding fixed-income products such as bank CDs. In other words, under that scenario both stock and bond prices decline until a new equilibrium is discovered.

Further complicating matters is the surprising collapse in oil prices over the past three months, which is bad news for oil companies but good news for just about everyone else in the American economy. Most economists view higher oil prices as acting like a tax, siphoning money away from everyone and delivering it to a very small number of beneficiaries. However, when the reverse occurs and oil prices head down, the savings on fuel consumption tends to get spent across the board, creating a much larger amount of beneficiaries.

The stock market doesn’t know what to make of this double dose of supposed good news, dropping more than 3% from its intraday high on Monday to its intraday low on Wednesday before shooting back up on Thursday. From a longer term perspective the stock market is still retaining most of the gain accumulated over the past six months, with the S&P 500 Index still over 2,000 and the Dow Jones Industrial Average well above 17,000. But it’s the past week’s behavior that is troubling – if stronger employment and declining oil prices aren’t good for the U.S. economy, what is?

Potentially, there may be other factors at work that are independent of stock market attractiveness. For example, many publicly traded companies have bought back a lot of stock over the past couple of years, viewing that as a better use of their cash than earning almost nothing in interest by leaving it in the bank. As those buyback programs slowly wind down, one leg of support for the overall market is removed. The recent large uptick in employment may suggest that more capital is now being redirected into labor and away from share repurchases.

Rising investment in employment may also suggest that the incremental profit gains from technology and outsourcing are leveling off, making human capital competitive from an ROI (return on investment) perspective. For a long time the quickest route to improved profitability was to simply fire a bunch of employees and replace them with computer-aided technology to the extent feasible, and then outsource the remainder of the work that can only be done by people to much cheaper labor markets overseas.

That is still the trend, but the rate of growth in that trend may be slowing down to the point that there is greater gain to be had at the margin by investing in home grown labor. In the short run, that may make it tougher for companies to cost-cut their way out of trouble, but in the long run having a broader employment base is better for the overall economy. After all, human beings spend money on food, housing, and transportation. Computers don’t.