In a speech earlier this week, the Federal Reserve’s No. 2, Donald Kohn, couldn’t have been plainer when he said he does not expect the economy to snap back in a classic V-shape recovery.

The markets have a much rosier view. The Dow Jones industrial average has pushed through 10,000, JPMorgan Chase and Goldman Sachs are reporting eye-popping gains and the economic data have been notably perkier — with the glaring exception of employment. Even Treasury yields have reversed course after months of declines.

Enjoy it while it lasts. The gains in risky markets, and to some extent, safer ones, continue to be driven by the aftershocks of government policy rather than the deep roots of a recovery.

Some of that reality may be starting to dawn on investors. Today, the Dow slipped back a bit after Goldman’s stellar results — $5.25 earnings per share — failed to top lofty, whisper numbers circulating on trading desks ahead of the release. The fact that the bulk of the earnings came from trading also gave rise to concerns that its blow-out could be a one-hit wonder.

Still, the Dow is up more than 50 percent from its low in March and the latest round of economic data may continue to fuel hopes that the hard road ahead may be easier than Fed officials suggest. New York area manufacturing activity rose to a five-year high in October, while its employment measures moved into positive territory for the first time in a year, according to the latest survey by the New York Fed. The consumer prices report, meanwhile, showed that inflation is still tame while another leg down in jobless claims lent some optimism that even the labor market could be showing some sign of improvement.

There are plenty of caveats to the data, however. One, the New York area is hardly the capital of U.S. manufacturing, so while the gains are noteworthy, they shouldn’t necessarily be extrapolated to the rest of the country. Philadelphia’s survey in fact reported a slowdown in October from the previous month.

It’s no coincidence that the rally in riskier assets started in March, a month when the Fed hit turbo drive on its already easy monetary policy. And much of the gains since then have been the result of a recalibration of funds that had leaned heavily in hyper-safe investments like Treasury bills.

The economy and financial system are still a far way from heading back to normal. As my colleague Matthew Goldstein noted on Wednesday, JP Morgan’s $28 billion in net revenues said more about the prowess of its traders than a recovery in Main Street credit.

And the jobs picture alone is enough to keep over-extended consumers cautious for some time to come.

An ultra-easy credit policy will keep markets primed for some time to come, which is sure to test the will of the Federal Reserve, especially if Treasury yields continue to rise. It’s safe to say that no one at the Fed wants to create yet more asset bubbles, but Fed officials are right to stay focused on the very real risk of the economic recovery not taking hold.