Although Friday's employment number may be a grand slam for the Bush administration, one organ of the federal government finds its game greatly complicated by the huge runup in payrolls: the Federal Reserve.

Stocks and the dollar have rallied since the Labor Department released the March employment report at 8:30 a.m. EST, as traders celebrated the arrival of jobs to an economic party that has raged elsewhere for months. The Dow has added about 95 points while the dollar gained about 1.7% against the euro.

But the situation in markets that are usually considered more sophisticated interpreters of economic news is different, with a pitched battle currently resolving in the direction of forces concerned about an imminent rate tightening.

If that side is right, and a rate increase is in the cards sooner than later, the Bush administration might want to re-cork its champagne -- at least until July, when the likelihood of Fed action plunges as the election nears.

Bond yields, for one, are skyrocketing, in part because of perceptions Friday's number means an end to the Fed's commitment to low interest rates. The 10-year bond was recently down 2 2/32 in price, pushing the yield up from 3.89% last night to a recent 4.13%.

John Lonski, senior economist at Moody's, thinks the fixed-income market could be the excuse the Federal Open Markets Committee needs to tighten. Lonski said that if 10-year yields rise to 4.5%, the Fed "can say 'We're just following what the market is telling us to do.' "

Other financial instruments also foresee a tightening. Futures on Eurodollar contracts, which historically have been a reliable indicator of the market's rate expectations, priced in a quarter-point rise in the fed funds rate by September immediately after Friday's number hit the tape.

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