It’s Like Taking Candy From A Baby

May 10, 2012

How can a country build popular support for austerity when their governments are leveraging their children’s future to help mitigate the pain and severity of the problems faced by the parents. Why would anyone vote to take a hit in any form if they don’t see or feel the problem.

Popular support for reform in any country unfortunately won’t surface until the crisis is allowed to spill over to “Main Steet”. When that happens, holy cow is this going to be a doozy.

American led capitalism and American style bailouts will be the blame, but the real culprit will have been the global addiction and greedy dogmatic support for globalization. Globalization may work one day, but only at sustainable levels of growth.

Bringing forward a generation of consumption using ungodly sums of debt and calling it growth is neither transparent nor healthy.

Lending money to less worthy borrowers at rates supported by more worthy borrowers is a typical parent-child relationship.

However the current system has parents borrowing from children which is both immoral and unsustainable and it means that many kids today will be living with their parents for a lot longer than they know.

In Europe the situation is even worse as parents in the periphery are effectively borrowing from children in the core.

Ask many who worked at Lehman how 40x leverage works when the music stops. Article: European Central Bank Leveraged Like Lehman: Author

The European Central Bank is indebted to the hilt and is beginning to look like one of the banks it has done so much to save, according to the author Satyajit Das.

Full Story:


Taxation, Recession & Recovery

October 5, 2011

Excellent summary of comments from the March 8th, 2011 hearing on Principles of Efficient Tax Reform before the Senate Finance Committee.  The statement comes from a powerful group within academia, and generally offers prudent, insightful and seemingly sound advice.  In fact some of it looks very familiar given recent proposals from Washington.  These are the people you want informing decisions.

However the more I read and hear, the more I am convinced that our democratic process may in fact be fueling our economic fire.  Partisan politics will be the only thing that gets in the way of meaningful reforms in time to help get our economy back on track in time to have an opportunity to “grow” our way out of all of this.

These notes are a must read for anyone interested in knowing where US Tax Policy may be headed under Obama.  Among the proposals I favor and have written about in the past is a larger estate tax with a higher minimum for enforcement and a VAT tax on carbon in some form.  These notes argue strongly against VAT taxes in general, but with some understanding that such a tax on carbon would dually encourage domestic energy security as well as help impact the US effect on Climate Change.  I would go further to uncover more VAT taxes on other externalities that currently exacerbate misallocation of capital and resources.  Cigarette smoking is already under assault by layers of taxes and yet these high levels of taxation have not impinged tobacco company profitability due primarily to the inelastic demand of cigarettes .  I think we could find similar programs that could directly fund areas in dire need of support.  i.e. carbon related taxation should subsidize grid parity (which is now on the horizon) for a host of alternative energy sources.  Nicotine, alcohol, junk food, and even drugs provide inelastic demand that would serve as great platforms for VAT taxes to support local sustainable food development and healthcare costs directly impacted by the negative health affects of consumption of those items.

Additionally, we ought to consider taxing post consumer waste to better account for the end of life and cost of land of retiring natural resources that will never be reclaimed (in anyone’s lifetime).  A better understanding of the cost of buying, owning and disposing of consumer goods would enhance R&D into cradle to cradle manufacturing processes and indirectly incentivize both corporations and consumers to make better capital allocation decisions in a more sustainable manner.

My extrapolation from an open dialogue in taxation is that taxes ought to be used to dis incent the unsustainable economy, and used to accelerate the sustainable economy.  Rethinking taxation on debt would likely have to be a large part of that kind of thinking.

Hearing on Principles of Efficient Tax Reform, March 8, 2011


Rick Perry and All People Undereducated

September 29, 2011

I’m still not sure who listens to Rick Perry and believes he has half a clue. That said, I’ve only spent limited time in Texas and I suppose one could easily argue that Sarah Palin garnered more votes than I could.

I am reminded of a panel I watched a couple of years ago where two honorable representatives from the US Congress reflected on the state of economic affairs and their own understanding of them.

What hit home was that one of these representatives lamented at the amazing amount of information and data he had access to in his privileged position. He talked about how “cool” his morning briefings were which connected him to the audience. He then went on to say that when he first took office, he quickly realized his understanding of economics was rusty and his understanding of financial markets was about nil given the advent of modern financial products. Thus with all these amazing reports and classified data on his desk, none of it really told him very much.

He then went on to say that he took it upon himself to go back to school to better equip himself to understand and ultimately impact the information he was reading. After all, as member of the finance committee, that was his job.

I was stunned to hear one our representatives express his own lack of knowledge and astounded that he took it upon himself to educate himself to be a better leader.

What really blew me off my seat, however, was when he described the lack of understanding shared by his peers in the House and Senate and went on to say that among them all, he was the only one he was aware of to go back to school to learn about the things he was tasked to oversee.

Reading the growing circus that is Rick Perry’s campaign I was inspired to consider a new rule that ought to be imposed on all of our political representatives, particularly those with specific domain responsibility.

Simply, we ought to keep our 4 year election cycle but move to a 5 year service cycle in which upon election all public leaders spend one year in school learning everything from the basics of flawed public finance, to leadership, ethics and markets and to take electives related to any committees they may need to serve on.

We spend a lot of oxygen touting the importance of education in the US. We talk about educating our children, have requirements of higher education for most highly skilled professions, but yet any schmo from Texas with an affable personality and some financial backing can grab a soap box and lead our country. I think we’ve seen the dangers of that before and I don’t think the US just needs a rinse and repeat.

After all, the political vacuum is great at dishing out rules for everyone else to follow. Why not at least require they have half a clue of what the fuck they are talking about?

Ben Bernanke, ‘Money-Printing’ Would Be Out at Fed: Perry | September 29, 2011 | 08:28 AM EDT
Ben Bernanke no longer would be the Federal Reserve chairman and the central bank would be out of the money-printing business under a Rick-Perry-run White House, the Texas governor told CNBC.

The Republican presidential candidate has not hid his disdain for Bernanke, and he reiterated during a live interview that someone else would be in charge of monetary policy should Perry unseat President Barack Obama in the 2012 election.

“The statement towards Chairman Bernanke needs to be very clear to him, that making monetary policy to cover up bad fiscal policy is just bad public policy,” Perry said. “What we’re seeing is a Fed that is getting involved in things that frankly it does not need to be involved with. Printing money doesn’t do anything at this particular juncture except make the dollars in our pocket worth less money, plus it puts us in jeopardy of greater inflation in the future.”

Perry’s star has faded somewhat over the past week or so after turning in less-than-stellar performances in Republican candidate debates.

The fiery Texas governor has found himself criticized on the right for his immigration stance, and the left for his hard-line stances on social issues.

He has been especially rough on Bernanke, drawing criticism at one point for suggesting that if the central bank chief ever came to Texas he would face retribution for this actions.

The American Jobs Act Review (Part I)

September 19, 2011

Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction

Below I comment on on the first few pages (7-12) of the Presidents Plan for Economic Growth and Deficit Reduction .  This is a dense document and my review is neither complete nor my analysis based on sharp political knowledge.  As my blog indicates I focus on anecdotal evidence.  What struck me, having never read such a dense piece of policy, is the transparency of bad and self-serving ideas.  I do not mean for my own biases to negate otherwise good ideas that are also included.

There were a number of good ideas, bad ideas and self-serving ideas layered into the document with lazy political acumen. Below I offer some high-lights, low-lights and some “grow-lights” that seem engineered to increase votes into help Obama’s reelection campaign.  My review starts in the American Jobs Act but stops short of the unemployment insurance section and before the discussion on Mandatory Savings, Health Savings and Tax Reform.  Clearly this list will be expanded when I have more time. I hope to post a Part II in the next day or so.

High-lights – Potential solid policy ideas with opportunities to create longer-term sustainable growth/deficit reduction

Provide a payroll tax cut to businesses, with a focus on small employers: Engineered to adversely help America’s small businesses.  Sadly the GOP will fight all the bad stuff, and ignore all the good stuff in an effort to stonewall into the campaign trail.

Help entrepreneurs and small businesses access capital and grow: One of the more interesting ideas engineered to stimulate entrepreneurship.  Items include: accelerated government payments to small business contractors; establish a framework for “crowdfunding” programs in concert with the SEC to help small companies raise capital; increase in guarantees for bonds to help small firms compete for infrastructure projects (this one smells like special interest handouts like Solyndra, not so good).  Whitehouse could probably raise substantial revenue by Trademarking “crowdfunding”.

Offer tax credits and career readiness efforts to boost veterans’ hiring: Returning Heros Tax Credit of up to $4,800 for unemployed veterans, and a Wounded Warriors Tax Credit of up to $9,600 that will increase the existing tax credit for firms that hire unemployed veterans with service-connected disabilities.”  I’m not sure of the message sent by quantifying the additional $4,800 on for wounded warriors, but the effort by the administration to help our amazing veterans is an excellent idea.

Improving our airports: While in one sense this might fall into the Low-light category due to the State Aid back door issue, this is a real area of need that can create meaningful efficiency improvements for commercial and passenger air traffic.

Funding for innovative transportation: I know this one is controversial primarily due to the call for high-speed rail.  I have seen worse expensive ideas.  The real issue is where we we are going to buy the technology from.  I’d be happier picking a battle that could be levered at least in part to American manufacturing.  Last I checked the Germans and Japanese have this market tied up.  What about retrofitting our transportation sector for electric and natural gas vehicles?  (neither were mentioned under this header)  At least those dollars would go to Ford and GM.

Establish a National Infrastructure Bank: Another controversial idea.  The devil will be in the details.  However, leveraging tax payer money with private investment is generally a winning combination.

Expand nationwide wireless Internet services for the public and the first responders and reduce the deficit: This is progress you can build on.  This is an excellent idea, and NEEDS to be advanced smartly.  These types of investments enhance national productivity while paving the way for REDUCED government expenses.  “The plan includes reallocating the D Block for public safety (costing $3 billion) and an additional $7 billion to support the deployment of this network and technological development to tailor the network to meet public safety requirements. This is part of a broader deficit-reducing wireless initiative that would free up public and private spectrum to enable the private sector to deploy highspeed wireless services to at least 98 percent of Americans, even those living in remote rural and farming communities.”

Grow-lights – Potential spam policy designed to provide short term stimulae to directly affect the 2012 election outcome.

Establish a complete payroll tax holiday for new jobs or wage increases: “CBO has identified this type of job creation tax cut as one of the most effective ways to help accelerate job growth.” Has the additional benefit of feeding the hope that POTUS gets reelected.  Tax holiday’s do nothing for long term sustainable growth.  They attempt to help politicians get reelected.

Extend 100 percent business expensing through 2012: “Extend 100 percent business expensing through 2012. “The President is proposing an extension of the 100-percent expensing provision that he signed into law in 2010, which rewards firms for making investments by allowing them to deduct the full value of those investments from their tax obligations through 2012”  Anything applied to 2012 explicitly automatically must be red-flagged into the campaign finance bucket.

Investments in making our Nation’s highway systems safer and more efficient: This one reeks of the job creation crack pipe.  A quick jolt, followed by a pronounced feeling of emptiness and wasted effort.  Has anyone ever been on a highway that is not currently under construction?  They are always under construction.  Try I-95 any day of the week.

Repairing transit systems and improving our rail systems:  Ironically this did not get labeled the Buffet Bill.  Somehow I wonder.

Expediting high-impact infrastructure projects: Government should not expedite anything that costs lots of money.  Unless of course there is a pending election.  That would be like having a 12 year old rush out to buy a car.

Low-lights – Potential counterproductive ideas that either stifle growth/spending reduction or are so absurd as to assure better policy measures get stonewalled in partisan politics.

Prevent teacher layoffs and keep police officers and firefighters on the job: These are the hand outs that the GOP cannot afford to fight against.  This is the “feel good” wasteful spending policy.  I in no way want to imply that these aren’t areas of dire importance and need, but they way this is framed it reads as backdoor aid to States which the GOP would never approve. I firmly believe that we need to invest in teachers, police officers, fire fighters, American Flags and apple pie.  That goes without saying.  What I can’t stand is the lemonade stand run by kids living in a McMansion.  Don’t patronize me to believe that dollars earmarked here will actually end up appropriated to the constituency being exploited to raise the funds.  If this passage turns into a backdoor blank-checks to the states, we will NEVER see this idea fulfill its intent.  It is noble in its spirit, but probably will fail in practice.  When 50 states chime in, this one is poised to end up to be so messy its never gets done and certainly not in the spirit it intended.  I’d be willing to bet that if this gets through a beleaguered Illinois may wind up with the best public schools in the country :)

Modernize at least 35,000 schools: ibid above.

Opportunities for all in the transportation sector: Always be suspect of any small numbers in a $4 trillion dollar plan. “The President’s plan will invest an additional $50 million in 2012 to enhance employment and job training opportunities that will benefit minorities, women, and socially and economically disadvantaged individuals in transportation-related activities, including construction, contract administration, inspection, and security. His plan will also invest an additional $10 million in 2012 to help minority-owned and disadvantaged business enterprises gain better access to transportation contracts.”  Also be suspect of any language that says “for all”.  This implies “for all voters”, and is so transparently engineered to buy votes in swing states.  What we need to is have this $60 million included in the campaign finance budget, as this is really what this item will be used for.

Put people back to work rehabilitating homes, businesses, and communities:  Not a fan of this one.  “Many regions with concentrated home foreclosures also have concentrations of vacant commercial structures that weigh on property values and make it less likely that new businesses will come into the community and invest new capital.”  On the plus side its an attempt to help depressed communities revitalize and proposes a public private partnership to do so.  Conversely, many of these geographies were over leveraged and over developed.  Beautifying defunct towns and sweeping empty streets wont do much without a natural job-base.  If residential and commercial real estate are defunct, there is a good reason.  We need to allow some ghost towns to become tourist traps.  I don’t say this without real empathy for those who may still be living in these areas, and substantial regret for their situations.  This kind of investment only rewards speculators.  Spending precious tax dollars in unsustainable communities is not the best and highest use of our nearly depleted fiscal stimulus.  For a fraction we could probably help remaining residents relocate to areas of the country where there are jobs, and help those communities enhance local infrastructure.  We need to be wise, not smart in how we do this, and to leverage investments that can create innovation and productivity, not social assistance.   This falls into the 2012 jobs for re-election bucket.  It’s also a back door bailout of regional banks.

Lessons from Solyndra

September 6, 2011
There has been a lot of press around Solyndra, most of it has been creating more noise than anything else.  I don’t have time to research the statistics of how many companies fail each day, nor do I know how many alternative energy companies have failed since the initial boom in the mid 2000’s, but there is nothing new about dead bodies on the road to innovation and the creation of new industries.
Of course what is selling this newsprint is that the government was counted as a large investor in the company, and the failure of Solyndra has become a touchstone for failed Keynesian spending.
I take a bit of offense to those seeking click-through for the easy “headline” story here.  True this is a good example of wasteful spending, I will not argue that this was terribly wasteful.  However, I do not think the lesson should be that the government has wasted money on “solar energy”.  I think the lesson should be the government has no business making direct investments in any private corporation.
What the government does need to do, is to appropriate taxpayer money in a manner that is in line with possible public benefits rather than private ones.  Any business student can tell you that among Porter’s Five Forces is a satellite force often noted as missing from Porter’s original approach.  The sixth (or five and a half) “force”, after buyer power, supplier power, barriers to entry, substitution and rivalry is government.  Two of the ways governments exert influence on the competitive dynamics of industries are through regulation, subsidies.  There is plenty of literature to support the thesis that sovereign industry winners (i.e. home country advantages) are often a function of sovereign investment and support for those industries either due to national security concerns, or economic importance.  Consider nuclear energy in Japan, oil in the middle east, automobiles of defense in the United States, airlines in almost every country, etc….  These are all areas where at the end of the day, the sovereign will support (or bail out) an entire industry because of perceived importance to the domestic economy (jobs) or national security.  Anywhere you see close government support or intervention in an industry you generally have competitive advantages.  At its core this is due to lower costs of capital for companies nurtured by sovereign support for their industry.
The boondoggled Solyndra investment is the result of Obama’s “shovel ready” approach which I have commented on before.  Whenever the government makes “shovel ready” a requirement, you are going to see a lot of wasteful spending on every halfwit with a political connection and a shiny new shovel.
Our country does need to make new investments in energy infrastructure.  I am sure someone has done more recent math, but I know that for a fraction of the trillions of dollars we have spent in Afghanistan and Iraq, and even possibly Afghanistan OR Iraq, we would currently be entirely energy independent.  It’s absurd that we have waged two decade long wars over oil which has finite capacity, and which we do not have much jurisdiction over.  Moreover, as has often been said, when we convert US Dollars into Petro Dollars we increase our trade deficit, subsidize directly or indirectly our enemies, export jobs,  and further entrench deteriorating legacy infrastructure.  What the government does need to do is to use money it would have spent on individual projects to support entire new industries, not individual new companies. Rookie mistake I guess.
Government spending in the space program resulted in a proliferation of technological advancement that inspired entirely new industries, including computing and telecommunications.  No one company is large enough to make that kind of investment.  No one company can think big enough to take on that kind of challenge.  Additionally, no one company would probably have turned a profit developing our original space program.  I’m sure the direct accounting resulted in billions of “wasteful” spending.  The endeavor was one of national security and during the cold war the space program was also about national pride.  Nonetheless every American could get their hands around the common benefit (even if they did not conceive of the actual outcomes) of putting a man on the moon.
China just a year ago offered to provide $80 billion dollars to backstop their domestic solar industry.  This lowered the cost of capital for all participants, and helped lead to the massive cost savings that Chinese manufacturers have developed, and which in turn have put companies like Solyndra out of business.  I don’t want to point to China’s model as a best practice, because they still allocate capital along socialist lines, and not by free markets.  However, many advanced economies have created subsidy programs to incentivize alternative energy development, which is what truly catalyzed the industry in the first place.  Europe was on the forefront of solar and wind technologies, and Germany in particular with its large energy intensive manufacturing base heavily subsidized the development of alternative energy.  Q-Cells was the original large solar panel manufacturer, not coincidentally from Germany.  However with the massive sovereign investment from China in domestic solar industries, and the rapid rise in the Euro further exacerbating Q-Cells cost issues for buyers, the company now teeters on the brink of insolvency.   China is well aware that alternative energy is the future for the global economy and China has had both the political authority and capital to see that they “win” the great solar race.  In the future oil will inevitably rise again to levels that make alternatives even more attractive than they are today.  At that time our US Dollars will no longer be converted to Petro Dollars, but will eventually be supporting China’s Red Solar Dollars.
Ironically I am totally for the development of US leadership in alternative energy infrastructure, and while I do think that we should probably siphon big oil support into scalable alternative energy industries (to include natural gas and nuclear to some extent), I am not totally opposed to carbon solutions in the medium term.  We need to take a portfolio approach to domestic energy needs, based on domestic supply considerations and topographical opportunities.  Every part of the US has unique advantages and disadvantages, and the clear winner for domestic energy will be a safer more independent grid and energy network, not an individual company or technology.
It’s not the government’s role in a capitalistic democracy to pick the winners and losers within an industry, but to the extent that new technologies can advance the local economy, aid national security and create spillover benefits to other industries (lower energy costs), it is the government’s role to see that those technologies are incubated and succeed at home.
Article from the New York Times
September 6, 2011

A Third Solar Company Files for Bankruptcy


WILMINGTON, Del. (Reuters) — Solyndra, a solar panel maker that received $535 million in federal loan guarantees, filed for bankruptcy on Tuesday.

Solyndra, which also received more than $700 million in venture capital financing, said it would try to find a buyer quickly to avoid a fire sale liquidation.

The solar industry has been in turmoil this year as a glut of panels has sent prices plummeting 25 percent. Manufacturing capacity expanded just as government austerity measures in Europe eliminated subsidies and undercut demand.

Solyndra cut prices to try to compete but said in court papers that it had been unable to match the extended payment terms offered by foreign competitors.

The company, based in Fremont, Calif., said last week it had suspended operations and laid off 1,100 workers.

Solyndra’s bankruptcy filing followed similar filings by Evergreen Solar and SpectraWatt, a private company that was backed by the Intel Corporation.

Solyndra said in documents filed in Delaware’s bankruptcy court that it planned to spend the next four weeks trying to drum up interest among potential buyers to avoid shutting down permanently and selling its assets piecemeal to repay its creditors.

If it finds a buyer, it could lead to the rehiring of some of its laid-off workers. One of those workers filed a class-action lawsuit against the company in the bankruptcy court, accusing Solyndra of violating the federal law that requires larger companies to give 60 days’ notice of layoffs.

Solyndra did not return a call seeking comment.

Ron Paul Asserts Wikileak Cable That Says H.W. Bush Lied About First Iraq War

September 4, 2011

“Once it becomes acceptable to equate truth with treason we are no longer a free society.”,00.shtml

WSJ Blog: Economists React: ‘Disturbing’ Way to Start Labor Day Weekend

September 2, 2011

From the WSJ Blog:

SEPTEMBER 2, 2011, 11:38 AM ET

Economists React: ‘Disturbing’ Way to Start Labor Day Weekend

Economists and others weigh in on the unchanged nonfarm payrolls number and steady 9.1% unemployment rate.

The stagnation in payroll employment is an ominous sign. The monthly gain in payrolls has now been below 100,000 for four consecutive months and the unemployment rate has been stuck at around 9% since the start of the year. –Paul Ashworth, Capital Economics

 Disturbing. There is no other way to describe the August employment report. The economy added exactly zero jobs over the month, the first time that precise number has occurred since World War II. Worse, the totals for both June and July were revised downward sharply. Indeed, if August is also downgraded we could see a negative number. The details were as distressing as the headline number. You have to back out the roughly 45,000 Verizon strikers who didn’t appear on the payrolls. They are back and will boost the September job numbers but even if they were working, the gain would have been disappointing. Except for health care few areas posted increases. –Naroff Economic Advisors

Not exactly the ideal way to start off the Labor Day holiday. Even though there were a host of one-time item impairing August’s results — fears of a government shutdown, strikes, and back-to-school seasonal factors being the most prominent — it’s hard to find any silver lining to this month’s dark cloud. The private sector payrolls increase of 17,000 was easily the worst in eighteen months. –Guy LeBas, Janney Montgomery Scott

What is particularly “bad” is the earnings data. We often say that the economy could create a trillion jobs each month but if nobody is earning any money, consumer spending is going nowhere. In August, average hourly earnings fell by 3 cents to $23.09. While this follows a decent gain in July, the year-over-year change in earnings is just 1.9%, a terribly weak rate of wage growth. Further, average weekly hours fell by one tenth. This is not good… Irrespective of any “one offs” that are skewing the data, job creation is the lifeblood of an economy — not necessarily equity prices. Without it, people should really cease acting surprised that consumers aren’t spending a ton of money, think we’re still in a recession and find their confidence falling through the floor.–Dan Greenhaus, BTIG LLC

The economy added no net new jobs in August, suggesting that the weak economic momentum of the first half of the year is carrying into the third quarter… The details in the establishment survey were categorically weak. Only the acyclical education and health services sector, leisure and hospitality and business services added jobs during the month. There were weakness across the board, with jobs losses in information, retail, manufacturing, construction, government all losing jobs. –Millan L. B. Mulraine, TD Securities

Declining labor force participation has kept the unemployment down to the 9.1% rate — not the way you want to keep the unemployment down. The aggregate hours index declined and thereby suggested less total labor input and thereby a likely continuation of subpar economic growth. –John Silvia, Wells Fargo

The importance of job growth cannot be overstated, as the wage and salary income that a labor market recovery, even a sub-par one by historical standards, provides to consumers is critical in providing fuel for ongoing economic growth. Therefore, a weak report for August is bad news indeed, Moreover, there is plenty of other evidence pointing to ongoing labor market struggles –Joshua Shapiro, MFR Inc.

Nonfarm payrolls are one of the four indicators the NBER puts most emphasis on, when determining business cycle turning points. Against this backdrop, today’s weak number – flat employment in August plus downward revisions to the previous two months – clearly raises the specter that the US has already entered or is at least close to enter another recession. –Harm Bandholz, Unicredit

All in all, the data look more consistent with continued growth at an unsatisfactory slow pace than with a new recession. Incorporating today’s data, our recession probability model remains at roughly 30%. –Jay Feldman, Credit Suisse

The problem doesn’t seem to be an upsurge in firings, since initial unemployment claims have not climbed, but a lack of hiring, resulting from a lack of growth in demand and huge policy uncertainty. The extreme uncertainty over the outcome of the debt-ceiling debate probably did extra damage to the August figures. Recent trends are perilously close to stall speed for the economy. They don’t yet say that we have tipped into recession, but that risk remains high (40% odds, in our view). –Nigel Gault, IHS Global Insight

There are two big questions hovering over the markets and, to my mind, today’s numbers did little to answer either. First, we knew the economy was relatively soft in August. Is August’s soft patch going to be a one‐month hiccup or a longer‐lasting weakness that gathers momentum? While the incoming August data is important, I would place much more weight on the yet‐to‐be‐determined performance of the economy in September. Second, what does Ben Bernanke have up his sleeve? We all know that Bernanke is predisposed to act, and today’s data will only reinforce the resolve of Bernanke and the doves on the FOMC to push another button. In fact, I find it hard to imagine that the Fed would hold back from acting again over the next meeting or two. –Stephen Stanley, Pierpoint Securities

Financial market volatility spiked in late July and continued at high levels throughout August, leading businesses to delay hiring plans amid the unusually uncertain outlook… In all, this weak employment report will add fuel to the fire for President Obama who is scheduled to present a jobs stimulus package to Congress on 8 September. In addition, the odds are now tilted in favor of additional easing by the Fed, the form of which will be debated vigorously at the 2-day meeting beginning 20 September.–David Resler, Nomura Global Economics

 The problem for Obama and Bernanke is that the employment numbers still aren’t bad enough to galvanize a political response. They are bad enough for lots of competing ideas to enter an arena where the underlying political will is to do nothing lest one party or the other get credit for job creation. Within the FOMC, Bernanke can still drive some sort of response by virtue of his being Chairman and he likely will but it won’t be big — the strong dissent remains and political support among conservatives also remains at low ebb. There is, however, always the possibility that banking problems move the Fed sooner with less dissent. –Steven Blitz, ITG Investment Research

We characterize this employment report as weak with the softness from the establishment report and trends in hours and earnings from the household survey as offsetting the rise in household employment. Net of the Verizon labor dispute, private payroll growth appears to be more in line with that observed in May and June. We see today’s report as increasing the probability of further monetary policy stimulus at the September FOMC meeting. –Michael Gapen, Barclays Capital

We think business confidence is starting to level off, assisted by lower energy prices and robust core retail sales, so fourth quarter payrolls should be better. –Ian Shepherdson, High Frequency Economics

The lack of demand is the single biggest problem. It has led to this slow pace of hiring, especially in small firms in “core” services (which excludes health and education). There seems to be little to no help on the way from monetary or fiscal policy, at the federal, state, or local level. It all adds up to little change in a slow labor market over the next few months. – Bart van Ark, Conference Board

 The adjusted payroll gain seen in August was the weakest of the year despite the fact that jobless claims during the month were below year-to-date average (and well below the average seen during the prior 3 months). The combination of relatively low jobless claims and low net employment growth suggests that new hiring decelerated quite a bit in August. This is consistent with the notion that the political environment has had a powerful negative impact on business sentiment. While we don’t have a timely broad-based measure of business perception of government policy, the University of Michigan survey asks households every month for their opinion about the government’s economic policy. The August results showed the highest degree of dissatisfaction in the history of the survey, which stretches back to 1978. –David Greenlaw, Morgan Stanley

Wrangling in Congress and the eventual deficit deal underscored the inability of government to jump-start the labor market. Employers and consumers have lost confidence in the economy, with employers increasingly hesitant to hire and consumers fearful about the future. Rising costs have not helped nor has vanishing household wealth. –Sophia Koropeckyj, Moody’s Analytics

It’s often said when it rains, it pours. That is an apt description of the August employment report and the likely path in the labor market later this year. Given slowing growth in the real economy there is little in the employment report to indicate a pickup in job creating heading into the final 16 weeks of 2011. –Joseph Brusuelas, Bloomberg