Although the ADP employment report was stronger than expected it should not dissuade the Fed from their recent initiative.   That is to heal the housing market and keep American's working.  (click for more...)

The only way the Fed can heal the housing market is by keeping rates low, and keeping people employed.  With 9.6 months worth of existing homes on the market and over 10 month supply of new homes still on the market, the Fed can still not afford to have the housing supply to increase due to foreclosures or forced sales due to layoffs.  By lowering rates they are attempting to not only keep rates low ,but to also keep businesses confidence high so they do not start laying off workers because of a "weak economy".   

Layoffs tend to come in waves.  Businesses will more inclined to layoff people when other businesses are doing the same.  Just as when strong demand for workers forces businessess to fight for employers, when the opposite is happening, no one wants to be the business that does not address the "weak economy" by laying off workers.  As a result, there tends to be a spike in the unemployment rate when the layoff wave starts.  The chart below shows the spike in the employment rate during the slower recessionary growth starting in 2001.  As you can see, it is hard to slow, once the mindset of layoffs starts. 

The US unemployment rate did rise to 5.0% last month  However, on a historical basis, it still remains low.  If the rate should continue to rise and get above 5.6% or so, it will probably be on the way toward even higher rates as layoff momemtum increases.  If on the other hand it is able to stay steady due to  future confidence in economy, the housing market will slowly improve and the US economy will likewise start to heal.