Rising unemployment hurts the economy, but does it hurt the stock market?

You'd think so. But a look at recent history tells a different tale. It turns out that economic data, including jobs data, are too often just like the bureaucracy that provides them: Slow, behind the curve and backward-looking. For instance, most Americans already figured out we were in a recession way before it became "official" this week.

The stock market, by contrast, is inherently forward-looking. It moves based on millions of bets that investors are placing on the future. This is why trying to time the market as an investor is so tough and largely pointless.

At least this is what is borne out in the, well, data. As the charts below show, in past recessions jobless claims peaked well after stocks had begun rallying back.

"Six months before jobless claims peak the market will take off," says Todd McCallister , who is co-portfolio manager of the Eagle Mid Cap Stock fund (HMCAX), which has more than $1 billion in assets. "We dated the recession to December 2007, which means we're halfway through it. So there's a danger if history repeats itself of not being in the market."

To put the current jobless picture in perspective: The Labor Department reported that the unemployment rate hit 6.7% in November, up from 6.5% in October. The last time unemployment reached this level or higher wasn't the Great Depression but 1993 , when unemployment was 6.9%. The year before that it was 7.5%. Some economists are predicting we'll get to the 9% range by next year's end, which would put us on par with the levels reached in the early 1980s.

New weekly jobless claims are currently in the 500,000-plus realm, which we last touched in September 2001. Before that, it was again the early '80s that we last crossed that territory.

What does all this mean for stocks? If the 1980s are our nearest guide, first breathe a big sigh of relief. Those downturns lasted about two years combined. As far as stocks go, there's also some room for optimism. In the 1980 recession, the S&P 500 rallied 20% off its low before continuing jobless claims peaked, according to Bespoke Investment Group. And in the 1981-82 recession, by the time continuing jobless claims peaked in November 1982 the S&P 500 had rallied 38%, according to Bespoke.

A similar scenario played out in the 1973-75 recession.

"While nobody knows for sure where jobless claims will peak, barring an outright depression, they're more than likely closer to a peak than a trough," Bespoke said in a research report Nov. 11.

Granted, these are strange times and there are multiple moving parts, including a new administration and Congress, that could determine where your portfolio heads. If you're not willing to go out on a limb with stocks, there is one area that "unequivocally" does better when unemployment trends go up: education companies. That's because people who lose their jobs return to school to improve their credentials and wait out the slowdown, McCallister says. The catch is that these names are already trading at high price/earnings ratios. Apollo Group (APOL), for instance, which owns the University of Phoenix, College for Financial Planning Institutes and other schools, is trading at 26 times trailing earnings.

While it makes sense to hold on to such education companies if they're already in your portfolio, if past is prelude it might be better to invest in where you think the economy is going, not where it's been.

Source: Bespoke Investment Group