Even as the sovereign-debt crisis in Europe continued to simmer and economic growth slowed in much of Asia, the S&P 500 turned in earnings per share (EPS) growth of about 7 percent in the first quarter. That’s encouraging when considering that analysts’ consensus estimate called for just 3 percent growth. This performance was underscored by the fact that 71 percent of reporting companies surprised to the upside. In an uncertain economic environment, that’s a pretty impressive performance.

What is being less widely reported, however, is that revenue grew by just under 5 percent. While that’s better than expected, revenue growth is still not nearly as strong as it should be.

EPS can be a handy metric for measuring managerial performance; if earnings are growing at a decent rate, then investors often assume that management is performing ably. But more often than not, EPS can be influenced as much by accounting gimmicks and cost efficiencies as actual cash f lows. And most of the EPS growth that occurred in the first quarter is more reflective of rising profit margins (i.e., doing more with less) than an improving business environment.

By contrast, growing revenue reflects a growing business. And growing businesses will ultimately drive the hiring that the economy so desperately needs. Until the unemployment rate falls below 6 percent, wage growth will remain flat and continue to dampen consumer spending.

So while current growth in earnings and revenue is enough to drive a rising stock market, it’s not enough to drive a significant economic improvement. The market seems satisfied with this growth, but it’s actually below trend when compared to last year.

Perhaps investors are merely relieved that earnings aren’t nearly as bad as many had anticipated. But that relief could be fleeting, since margins can only be stretched so far. Once maximum efficiencies are achieved, companies will struggle to maintain growing earnings.

If earnings eventually disappoint investors or economic data continues to worsen, then the market could easily lose momentum. Although 2012 has been a relief so far after last year’s turmoil, investors should still maintain a defensive posture by focusing on high-quality companies in sectors such as health care and consumer staples, as well as consistent dividend payers. And if the market does sustain its momentum, these types of securities should still produce solid gains, even if they moderately lag the frothier fare.