So, is the rate chopping done in the treasury market? Maybe, maybe not…the biggie jobs report is tomorrow. Bonds are lower this morning on position squaring before tomorrow's unemployment/non-farm payroll report as prices still remain elevated (yields low). An upward revision to euro zone GDP growth also hurt bonds. The Treasury announced $67 billion in coupon debt for auction next week. Thirty-year bonds are down 1 6/32, yield 3.71%. Ten-year notes are down 11/32, yield 2.61%. Two-year notes are unchanged, yield .49%.

Are we getting any structural solutions??? As Pimco’s El-Erian said earlier in the week, “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.” Folks, a lot of this stuff can be done without throwing money down a black hole. Are we just getting a bloated deficit that can hurt us in other ways (think Greece)?

And doesn’t the consumer have to go through the painful process of applying the machete to their debt (think New Normal). Folks, this takes time. As talk of another round of fiscal stimulus grows as politicians in Washington worry about retaining their jobs, it is important to revisit previously expressed thoughts/facts. Gluskin Sheff's David Rosenberg noted yesterday: "And, we now see that a $1.5 trillion deficit just isn’t enough for the folks at the White House who, the WSJ reports today, are 'considering a range of new measures to boost economic growth, including tax cuts and a new nationwide infrastructure program.' Wait a second — these are 'new'? Wasn’t this part of the ballyhooed round of fiscal stimulus unveiled a year-and-a-half ago? Maybe, just maybe, the government should move out of denial and into acceptance that it is a futile exercise to play around with nature. Perhaps the process of mean reverting to a household debt/asset ratio of 12.5% (now 20%) and household debt/income ratio of 65% (now 130%) requires additional deleveraging of $6 trillion and should be allowed to occur as quickly as possible. Short-term pain for long-term gain. Households, left to their own devices without all the distortions by relentless government meddling, are finding ways to expedite the process. One example of this is the growing number of U.S. homeowners who are opting to pay down their mortgages by reducing their effective amortization schedules upon refinancing — the share of who refinanced into a 15-year term so far in 2010 has shot up to 26% from 18% last year (CoreLogic data)."

What about the job machete? Initial jobless claims fell 6,000 to 472,000 in the week ending August 28. A reading of 475,000 was expected. The previous week was revised higher by 5,000 to 478,000. Continuing claims fell 23,000 to 4.456 million in the weekending August 21.

Same job story…less use of the job machete but little hiring? Indeed, Steven Wood, Chief Economist at Insight Economics notes "Initial claims fell for the second consecutive week after reaching its highest level in the past 9 months in the week ended August 14. Although new claims are often very volatile during the summer due to seasonal adjustment difficulties, these data still suggest a softer labor market. Although new claims are much lower than they were a year ago, they are still high and are no longer trending lower. Continuing claims also fell in the latest week and remain on a declining, albeit slowing, trend. There was also a small decline in the number of people collecting benefits under the federal extended and emergency unemployment insurance programs; this was the first decline since the recent extension of emergency unemployment insurance that had greatly boosted the number of claimants during the prior 4 weeks. Data for the survey week for the August Employment Situation report suggest that hiring is still relatively weak."

“Frozen” housing market. Pending home sales in July rose 5.2%. A decline of 1.0 was expected. The previous month was revised from a decline of 2.8% to a decline of 2.6%. This is the first gain since April following the expiration of the home buyers’ tax credit. Pending sales rose in all regions led by a 11.6% gain in the West. Good news, although pending sales remain at a depressed negative 20.1% year/year. Certainly the mortgage application purchases index suggest sales remain depressed.

Making more machetes. Factory orders in July rose .1%. A gain of .2% was expected. The previous month was revised from a decline of 1.2% to a decline of .6%. Transportation rose 12.9% on strong civilian aircraft orders. Ex-transportation orders fell 1.5%. Non-defense capital good orders (a proxy for capital spending) ex-aircraft fell 7.2%. Shipments rose 1.1%, inventories rose 1.1% and unfilled orders fell .1%. The data implies a small decline to 2QGDP of 1.6%.

Job machete productivity has ran its course for business but frozen wages have not? Frozen wages good for inflation (if you are not concerned about deflation) but not for spending. Non-farm productivity in the second quarter was revised from a decline of .9% to a decline of 1.8%, close to expectations. Output was revised lower by 1% to 1.6% while employee hours were only revised lower by .1%. Unit labor costs were revised higher to a gain of 1.1% vs. a gain of .2%. Year/year productivity was revised to 3.7% vs. 3.9% while unit labor coast were unchanged at -2.8%. The revisions reflect downward revisions to second quarter GDP. No wage pressures evident with much slack existing in this category.

Oh, I guess you don’t have any problems. The ECB will maintain its emergency lending program citing US economic problems (Was there a sovereign debt crisis???). The European Central Bank (ECB) left interest rates unchanged at 1% and mainlined its emergency lending program into '11 as the economic risks facing the US may hurt growth in the euro zone. Meanwhile second quarter GDP was revised higher to 1.9% vs. 1.7% increasing optimism on global growth. It is unlikely the sovereign debt crisis encompassing Europe is over.

Coming attractions. Friday brings data on unemployment/non-farm payrolls and the ISM non-manufacturing index.