On Election Eve, bank economist say a rate cut doesn't seem to be in the cards.

For all the dust kicked up in the credit markets recently by speculation over who will win the presidential race, economists are now turning their sights to another factor that will affect rates: this Friday's employment report.

And many of them are betting that October's employment growth was strong enough to prevent the Federal Reserve from reducing short-term rates yet again.

"The employment report would have to be an unmitigated disaster to spark an ease," says Dana Sorentino, money market economist with Citibank.

The consensus is that nonfarm employment grew a moderate 50,000 to 100,000 jobs in October, says Sung Won Sohn, chief economist at Norwest Corp. "If that's the case, I don't think the Fed will ease" in the next few weeks.

A Significant Improvement

Such an increase would be an significant improvement from September, when nonfarm payrolls fell by 57,000.

Market players had widely expected an easing after that report -- and pushed down short-term rates in anticipation. But the Fed stayed put, and rates have since gone up across the board.

Three-month Treasury bills were yielding 3.01% Friday afternoon, 34 basis points higher than a month earlier, when the September employment figures were reported. The 30-year bond jumped 31 basis points in the same period, and was yielding 7.64% on Friday.

Reports of employment growth have heavily influenced the Fed's rate decisions. "The Fed has eased so many times on the employment report that you have to say it is a pivotal point," says Ms. Sorrentino.

Inflation Fears

Expectations that the Democracts will capture the White House have also contributed to the recent increase in interest rates, reflecting market fears that a Clinton administration would increase spending to boost the economy, and hence spark inflation.

But most economists say a Clinton win would be unlikely to push interest rates any higher.

"The so-called Clinton trade has been played to death," says Anthony Karydakis, senior financial economist with First National Bank of Chicago.

"The Clinton effect has also been used as an excuse" by market participants who can find no other explanation for the rate run-up, he adds.

The bond market itself would have an important influence over the fiscal policy of a Clinton administration, says Jeff Thredgold, chief economist for KeyCorp.

"The next four years could see full Democratic control of the governmental checkbook, at odds with a powerful and diverse group of deficit-wary, inflation-wary bond market vigilantes," he says.

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