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Jobs plentiful, Fed behind the curve

The U.S. job market seems be getting better and better. Unemployment is now at 5.9%, the lowest since 2008. While this is good news for the economy, it may be too good for the Federal Reserve. "The Fed has said the unemployment rate is going to 5.5% by the end of next year, the unemployment rate is at 5.9% already and headed down at a pretty rapid clip, it's going to get there way ahead of the Fed, perhaps even in the spring of 2015,” says Charles Lieberman, chief investment officer, at Advisors Capital Management.

Tomorrow the Bureau of Labor Statistics is expected to show that employers added as many as 240,000 jobs in October, according to economists, while the national unemployment rate likely held steady at 5.9%.

If unemployment were to fall too fast the Fed runs the risk of getting caught short fears Lieberman, especially with interest rates near zero. “What happens when the unemployment rate gets to 5.5% and they are still close to zero? It shows they are way behind the curve and so they will have to catch up and that’s going to scare the market.” Both the S&P 500 Index (^GSPC) and the Dow Jones Industrial Average (^DJI) are hovering at record levels this year.

There are few doubts the job market is on an uptrend. On Wednesday, ADP reported private-sector employers added 230,000 jobs in October. "Employment continues to trend upward as we begin the last quarter of 2014, driven mostly by small to mid-sized companies,” said Carlos Rodriguez, president and chief executive officer of ADP. “October’s job growth is the highest since June and the second highest gain of 2014.”

The BLS will release the employment report for October at 8:30am ET on November 7, 2014.