Knight Ridder (NYSE:KRI), the second-largest name in newspapers, reported a 2.5% increase in net income for its fourth quarter Wednesday, beating analysts' expectations in the process. Though some investors may be starting to look for a stronger showing from newspapers, the long-awaited recovery in advertising isn't obvious yet.

Advertising revenues for the quarter remained flat compared to the same quarter last year, though the glimmer of hope was a 1.4% increase in December.

If Knight Ridder needs a little help, it seems it will come in the form of help-wanted advertising. Despite an economy that only added 1,000 jobs in December (note: Reuters reported today that the Labor Department's data may have understated job growth), the upward creep of Knight Ridder's December ad revenues represents a ray of hope.

Newspapers tell us about the world we live in, so it seems a strange irony that they have borne the brunt of the lackluster economy. Advertisers' marketing budgets were slashed and hiring was anemic, as compared to those help-wanted tomes stuffed into the Sunday editions in 1999 or 2000. Even the war in Iraq -- a great driver for consuming news -- cut down on travel-related advertising, as Fool LouAnn Lofton observed early last year.

Add to that a different kind of news consumer, changed by the advent of the Internet. Many people have fired the paperboy to flee to mostly free, real-time sources; meanwhile, both the print versions and their online counterparts largely depend on advertising bucks.

Other companies that face the same environment include Dow Jones (NYSE:DJ), Gannett (NYSE:GCI), New York Times (NYSE:NYT), and Tribune (NYSE:TRB). In December, the Newspaper Association of America released an upbeat yet conservative outlook for the industry overall, predicting an advertising boost of 4.1%. Specifically, it sees classified, national advertising, and retail ad spending increasing by 4.5%, 6.5%, and 3%, respectively.

There are several key factors, in addition to the critical job market. Think real estate (higher interest rates would equal less advertising); the popularity of new cars; retail (more people employed means more shoppers, of course); and events that would have a positive impact on national newspapers, such as the Olympics and the presidential election advertising.

Regardless, the extent to which the overall economy heats up will have a direct correlation to ad revenues, and that's anybody's guess. Is Knight Ridder going to be on top of the news this year? Keep an eye on the economy.

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