Logan Mohtashami: How government job growth killed a July rate cut

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs report and what it means for Fed rate cuts.   Related to this episode:   Government job growth kills possibility of July rate cut  https://www.housingwire.com/articles/government-job-growth-kills-possibility-of-july-rate-cut/   ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠More info about HousingWire⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://lnk.bio/housingwire   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about that

00:11jobs report we were all waiting for and what effect it will have on mortgage rates now.

00:17Logan, welcome back to the podcast on this July 4th.

00:20Happy 4th of July to everyone, even the American bears. You know, it's funny. Yesterday I tweeted

00:26out, I said, what a terrible 15 years to be a doomer. I mean, since 2010, I mean, legitimately

00:34every doomer thing has been wrong and all they had going for them was COVID, right? And that

00:41lasted a few weeks. I mean, you think about 15 years of your life thrown out the door just for

00:48some devotion to some gold God that doesn't even exist. I mean, it's no wonder these guys are so

00:54angry all the time. It's just, and then I was July the 4th and I was telling everybody, you know,

01:01I'm willing to forgive you guys, at least for the first few weeks of COVID. But after April 7th,

01:052020, I can't. And we sit here and let me like resonate this to the Gen X people.

01:13Guys, it's our time. Our generational movie was Goonies and it's our time down here. We're not

01:20going up Troy's bucket, right? We're not going out with the boomer doomers out there.

01:25All we have to lead the next generation for the next 15 years. And we're not going to do this

01:30constant 24 seven doom porn stuff like the baby boomers have added. Oh my God, the dead. No,

01:35that's the, no, no, it's our time to lead and let these people just age out and die and go off to the

01:41afterlife. But it is Gen X is time to take charge. And it's the end of the reign of terror of the

01:48boomer doomers out there in America. Okay. Well, you know, when I said happy July 4th,

01:54I wasn't really expecting all that, but I appreciate it. And I'm sure as a, as a fellow

01:58Gen Xer, although what do you like to call me an elderly? You're elder Gen X. You're like right

02:04on the edge. It doesn't matter. I'm still in. So I appreciate this message. Wow. What a week we've

02:11had topped off by this incredible, it was supposed to be jobs Friday, but it moved to jobs Thursday

02:17report that we got in, which really just, it, it helped nobody that, that report helped nobody.

02:23I I'm laughing because the 10 year yield, like I think it closed at four 34.9. I didn't get my 4.35.

02:31So I was incorrect. Then I was able to hold that 4.35. But in any case, when I saw the headline report,

02:38I have to tweet it right away. But then I go look at the jobs being created and I almost cracked a rib

02:44laughing. And all I could think of is Alanis Morissette. Isn't it ironic, you know, that the

02:50one week where Trump and Pulte go, you know, guns of Navarone to, uh, Powell should resign. You know,

03:00we should have emergency rate cuts, you know, whatever it is. Then the jobs report, the headline

03:06beat, but it was pretty much government jobs. Majority of the jobs were government jobs. It was

03:12state and local teachers being hired. And because of that, I mean, the payroll would have been 74,000,

03:18which if it was 74,000, Oh, could you imagine all the drama between now until the next Fed meeting?

03:24But because the headline was that bond traders just went ahead and sold right away, took us to like,

03:30you know, four 36 and then slowly started to creep lower. But literally the one sector of the economy

03:37that Musk and Trump tried to destroy, and it's not federal workers, federal workers, uh, didn't have

03:43any, but it was state and local and it boosted up the report. I mean, talk about awkward and ironic.

03:50I mean, I've never, I've done this for a very long time. I've never laughed so hard after a jobs report

03:57because of the implications that was happening before it, you know, what's going to happen over the next,

04:02uh, uh, 28 days before the next, uh, the Fed meets and how it was government jobs that boosted

04:09the numbers up to kind of above trend. And then of course, like we've always talked about this year,

04:14if labor force growth is slowing down, you, you need, you, you don't need a lot of jobs to keep

04:20the unemployment rate low because there's less people looking for work. So unemployment rate ticked down

04:25headline jobs, beat 10 year yield went up. And it pretty much, you know, unless jobless claims

04:31really takes off because the jobless claims date are ticked down lower, you're not probably getting

04:35a July rate cut. And that's what we talked about in, uh, yesterday's podcast. Uh, but wow, it's

04:41because of the government. So in some ways I think of Elon Musk, when he was laughing, like, you know,

04:48how he does sometimes like, you know, uh, uh, somebody crazy and then, uh, Baron Trump's kid is sitting

04:54there or standing there just looking like you can't move. And in some ways Musk didn't do enough

05:01damage to the government workers. And here we are today, but I think the market reads outside of

05:07that, you know, it's a short day, so you can't really, you know, have too much, uh, uh, action on,

05:13on, on, on a Thursday before holiday, but boy, the payroll, private payrolls are slowing down.

05:18Uh, manufacturing jobs lost again, residential construction jobs had a slight decline.

05:25If you take out the government jobs, state workers, 74,000 payroll, it's softer, right?

05:32There's no ifs, ands, or buts, but because of the headline report, you just got to go with it.

05:37It's a holiday. Everyone's like, whatever, we'll, we'll deal with it next week.

05:40Oh my gosh. It's so crazy. So where do we end the week for mortgage rates?

05:45A mortgage rate's slightly higher because the spreads are good. You know, um, it, it is

05:53interesting. Uh, this, this week was a really good week to show that kind of the spreads being so

06:00much better than 20, uh, uh, 2023 levels really impacts rates got down. I think 6.67% and ended

06:10off at 6. you know, seven, uh, five, somewhere around there, not too much, uh, uh, of a damage

06:17on that side, especially with all the data, but, uh, the spreads being good was, was very helpful

06:23in that regard. Uh, and we're, we are, you know, I think early in the week when I said the 10 year

06:30yields at kind of four 21, it's like, you know, we really do need weaker data to kind of push this

06:35any lower because we're, we're really pushing it now. Uh, job openings data passed passing grade,

06:42uh, ADP report negative markets shouldn't have care about that. They didn't. And then the jobs

06:48Friday, which anybody could make this report into anything they want. But the truth is that the

06:55one-time government helped the headlines, but the private payrolls are slowing down. Manufacturing

07:00jobs are lost residential. This, you know, it's getting to that point to where we, Trump should

07:06be talking about neutral policy, not emergency rate cut levels. And then there's a better way to

07:13actually, you know, talk down the fed that, you know, why aren't we closer to neutral policy when

07:19clearly, you know, the private, uh, uh, growth jobs are slowing down, but what a week, man, what a week,

07:25what a, what a way to end it off because it's, it's hilarious that government jobs boosted this

07:31report more than any other reported I've seen in, in, in, in recent history. As he said in your

07:37article, this, uh, you know, this has got to be pretty, uh, you know, difficult for him. He was

07:43just calling for emergency rate cuts. It really turned up the heat this whole week on, you've got

07:47to cut rates. It's like, and then this job reports undermines it. What do you do if you're Trump? You can't

07:53sit there and go, I mean, the, you know, they were saying that, you know, a lot of the government

07:57Twitter accounts, Oh, 147,000 jobs created better than expectations. Like, what do you say of that?

08:04You can't, you can't just go, Oh my God, the job numbers are fake. It's government jobs. We need to

08:08cut rates. So this is the problem with making rate cuts about interest payments with a budget,

08:14because you're, you're really like going into the accommodative rate stance right away.

08:19Now you could only do that either the economies in recession, or, you know, you really want interest

08:25payments down for the deficit. So it's just one of these things. I, of course I would have approached

08:30it a completely different way from the start all the way back to 2022, but I am not in charge. So

08:34who cares? But in any case, it was really ironic how that the government report, you know, and a lot

08:42of people were like, wait a second, the ADP report said this, like now the progressives are saying

08:46the jobs data is fake. No, it isn't. You know, uh, we have constant revisions and, and, and stuff

08:53like this throughout the years, you know, that's, that's, there's nothing wrong. The jobless claims

08:57data is the really fast velocity reports and the continuing claims are elevated, which means the

09:02labor market's softer. It's harder to find work. It looks, that looks about right, but the initial

09:07claims are showing not a labor market breaking. So really fascinating. I mean, what a way to end this

09:12week off, uh, for that. But, uh, I don't think anybody had that in their bingo card that government

09:20would outpace every single, uh, uh, labor sector that we have in America. Is this a, uh, an unusual

09:27move for States? Like, is this in response to something or is this just, this is what happened?

09:32No, I think it's just educational, uh, state hiring. Uh, there's, there's a lot of seasonality

09:36quirks that happen in, in, in labor reports. Just this happened all into one month. Um, so

09:43you had some people say, Oh my God, this is all the hiring for ice. No, it's just, you could go

09:47look at it. It's educational hiring by States. And, and again, federal workers are one thing. States

09:53are different. A lot of the growth in the job market last year, uh, that came from government

09:58or state and local as well. So it is what it is. Um, but, uh, uh, it does make it very interesting

10:06going out for the rest of the month. But if there was no government jobs hired at all this month,

10:13we ended up with a 74,000 payroll, all hell would have happened over the weekend. There would have

10:19been calls for, there's still going to be calls for Powell's, you know, investigation or resignations,

10:24but the 74,000 would have got that crowd a little bit louder in terms of, you know, why aren't we

10:30cutting rates with this? But again, we always said that they will wait and see, they need to see the

10:36labor market breaking and they don't mind growth slowing down for them. But, uh, if jobless claims

10:43had started to perk up a little bit there, they would feel the pressure at that. And that's why we

10:48said, even if this report was weak, which if you take government job, it is weak. It's not,

10:53it's not this feds kind of, uh, uh, model to be cutting rates in July, uh, because of that.

11:00Cause I could easily say, Hey, listen, government jobs, you take it out at 74,000 payrolls are

11:05weakening. Manufacturing jobs are lost. Residential construction jobs were lost. Uh, this is not an

11:10economy that needs modestly restrictive policy. Okay. So let's dig into the construction, uh,

11:16residential construction. This is one of your key metrics because it always falls before we go into

11:21a recession. So what did this report say about that? Slight decline. Okay. Not much growth coming

11:27slight decline. You always want to keep an eye on, on, on this for anybody that sees the charts. You

11:33could visually say, you could just say, wow, if I had just followed this thing, if I had just

11:37followed this thing and then never listened to these crazy people on CNBC since 2010 that were

11:42talking about a recession, every other 17 minutes, I would have been smarter than so many other people,

11:47but a slight decline. And again, uh, where, you know, some home builders are laying off people,

11:54you know, again, a lot of the home builders growth, uh, over the past few years have been in the South

12:00and the South has the most inventory. So the, the, the South is needs a lot of, uh, inventory drawdown

12:06before they start issuing permits. And again, permits have been at recessionary levels for some time

12:10now. So it's not like it's, uh, uh, it's been booming recently or anything like that. So, and a

12:18big chunk of the residential construction workers are remodeling work. And of course there's, you know,

12:22flood areas, fire areas, there there's, there's still some, uh, need for labor in those, in that

12:28marketplace. It's just that construction has been dead for some time now. We're just kind of working

12:33through the supply. And the key is that we have more, we have, we have more homes than ever that

12:39are in the stage of, uh, part of the data line, but hasn't started yet. So the builders are sitting

12:45there waiting and rates have been coming lower. And as rates have been coming lower, the builder

12:50stocks have tend to perform a little bit better recently. So keep it simple. 10 year yield goes down

12:55builder stocks do better. Why? Because rates go lower. So, uh, small decline, but it's something to

13:02keep an eye out if it builds into a trend, right? If anybody sees the chart, you can see it when it

13:07starts building into months and months and months and months of decline, there's where your labor

13:12triggers start to come up. And that's where jobless claims start to take up higher. And there's a

13:17connection right there. And that's how economic cycles have worked. Progressive, uh, progression

13:22models are very boring. They're tedious work, but they tend to be right because they, they're not here

13:28to like highlight and do what these jackass guys have done for 15 years. Recession is coming.

13:34Recession is coming. We're doomed. And all of a sudden, oh no, this didn't, you know, so hopefully

13:39now after all the, all these years of trying to teach economics, everyone could understand why

13:44that data line is very critical. Now that we're July the 4th, 2025, baby.

13:50Amazing. Um, you know, regression models are, I appreciate the accuracy of what you're doing. I

13:57just wish we could see lower mortgage rates. Like that's what we, that's what we need in our

14:03industry. We've been in a recession since 2022. So it's been, you know what I, I realize I keep

14:08on saying that it was June 16th, 5 31 PM. It was 5 0 1 PM. You have been given the wrong time. It was

14:15by, I went back and looked and I said, oh my God, it's 5 0 1 PM, not 5 31. What am I doing? So

14:20June, June 16th, 2022, we put the housing market intercession, existing home sales, because

14:28that's a transfer of commission industry where when demand falls, labor falls, income falls,

14:34transaction falls. If any other sector and they, if the economy had that in general terms,

14:39you're in a recession and we've stayed at very low levels, but we did have a, I did, I did present

14:46an interesting case with the recent purchase application data. Okay. So let's talk about

14:51the purchase application. And we talked about it in yesterday's podcast, but you said there was

14:55something else you wanted to say. So finally, some people are talking about this because it's had

15:01nine straight weeks of double digit growth. We're not talking like single slow, single dated double

15:06digit growth or anything, but it's literally had nine straight weeks of double digit growth.

15:10The volume has picked up so much that we're actually at the bottom levels of 2014 now.

15:18So the reason I bring this up is that since this was being brought up yesterday, I said,

15:23this is why we don't do a one-to-one with percentage of purchase application data with a percentage of

15:30existing home sales because the low level in 2014 was 4.75 million. That means if we did a one-to-one,

15:38we should be expecting near 750,000 more homes to be sold, you know, in the coming, in the coming

15:46weeks, because the, we've had, we've had now more than two months of double digit year over year

15:51growth. It doesn't mess. It doesn't really work that way. It's a trend data line, right? Our weekly

15:57pending sales are, you know, we almost close to year to date positive or yearly highs. So it's

16:06working itself in the system now, but it's not the volume levels that we saw at the bottom levels of

16:132014 back there. Cause that's, that would be almost 800,000 more existing home sales that that would shock

16:20everyone. People, people would literally be on like, uh, uh, would drink themselves into oblivion.

16:27The tumors, if that kind of sales growth came out, it would be so embarrassing because supposedly

16:32everyone is broken. We're all going to die very soon. And Moody's downgraded our debt and all this

16:37stuff. So in any case, uh, a little bit of growth year over year percentage. We, we explained it in the

16:42tracker. We always try to say the new listings data grew this year. We're working from a low bar rates are

16:47lower. So just kind of take it at that and let us do our thing. Let the tracker be your guide because

16:53we're months ahead of everyone else. And if that keeps on getting better and better, it'd be, be

16:58very similar to what we saw last year when rates went from seven and a half to 6%. Can you give us

17:03some, you know, is there a historical context here? Like the fact that those are close to 2014 levels means

17:10what? No, I mean that I'm, what I'm, what I'm, what I'm saying is that we shouldn't take the

17:17historical levels because that's a massive amount of existing home sales that are about to happen.

17:22If you, if you took it on a one-to-one, the bottom, the worst levels of existing home sales in 2014 was

17:294.75 million. We're just at a little bit above 4 million today. So if you took that in a historical

17:36context, you're like, Oh my God, sales are about to boom because we're matching back to 24. It's just

17:42a trend survey. So more people are applying for mortgages because more people are listing their

17:48homes this year than last year and rates fell kind of keep it simple at that demands picking up just a

17:53little bit. If rates fall down more in duration curve, then we'll see it in our pending home sales

17:58data. And it could be showing a little bit more growth. We're just starting on the growth thing right

18:04now. So don't, don't take the historical averages with purchase apps because you can, it'll be very

18:10confusing. Okay. So right now list out what are the data lines you track in the tracker, like starting

18:16from the top 10 year yield and mortgage. Okay. So, so when we talk about mortgage rates, we do 10 year

18:20yields. We, we go back and look at the forecast and we look at where the range is, right? Remember

18:25ebbs and flows, right? For the Instagram family waves, everything moves in waves and economics. Nothing

18:31is static or stays, you know, in one place. So the 10 year yield majority of the majority of the year

18:38has been in that range. Then we talk about the mortgage spreads. We show people visually, see when

18:43visually show the mortgage spreads, people get it then. So now we show how much improvement the

18:48mortgage spreads have been. And then we talk about what happened in the week to, to, for, for the

18:53mortgage rates to rise or to fall. Then we go into the demand curve data, purchase application data. We,

18:59we track it differently than everybody. We always do the year to dates, but we tie it to when rates

19:03are falling or rising this year, for the most part, rates have been falling outside of one reversal

19:09attempt. Positive, right? We do the year to date counts. How much growth is on the weekly side versus

19:16negative versus flat, but then the year over year data. And then we go to our pending sales data, our

19:21weekly pending sales. These are homes that go into contract right away, which might take 30 to 60

19:27days to get into the sales data, but they go into contract. Majority of those always tend to close.

19:34So it's a very good barometer in terms of how existing home sales will eventually be. And then

19:40we have our total pending home sales, which takes the total aggregate data kind of in a four week

19:45moving average. And then it gives you the broader picture. That's our demand side of the tracker.

19:49So we got rates, we got 10 year yield, mortgage rate spreads. Then we got purchase apps and weekly

19:54sales. Then we go into the inventory data. Now the inventory data, active inventory, weekly, raw,

19:59single family, nothing in contract or anything. What is available for sale? New listings data. These

20:05are the homes that come onto the market that don't have a contract right away. We're starting, we're

20:09going to be starting the seasonal decline soon. And just remember July the fourth weekend is going to

20:13ruin this data line for two weeks. And then we talk about the price cut percentage. These are the

20:18homes that are having a price cut right away. One third of all homes have price cuts. It'll be

20:24interesting to see because the last few weeks inventory growth has slowed. Price cut percentages

20:31have slowed. New listings data has been slowing a little bit for the last few weeks. So right now

20:36that's that data line. And we put it all together and then talk about what's going to happen next

20:40week. But this way, everyone has fresh current data that looks today and forward. If you're looking

20:49back at Case Shiller and existing home sales, months old does not work, right? This is the unfair

20:56advantage we've always thought we've had. And we've always thought our readers have had. Last year was a

21:01really good example. A lot of people were saying home prices were falling, going to fall 5%. And the

21:06weekly data got better for about six months. And by the end of the year, it never happened, right?

21:12Home prices were up 4%. So we had a lot of people that were off 9% on their 2024 forecast. I remember

21:19every one of you. In any case, if they'd follow the tracker or they have any live models for themselves,

21:26you would know things have changed. This is why I always care about someone's model to see

21:31where they're getting their stuff from because so many people have been so wrong on prices

21:35for 12, 13 years. So any human being can forecast, but their models, their fingerprints,

21:41their handprints, their face, everything. If their models are wrong, then it's like, oh God,

21:47you really shouldn't be talking about housing economics. So we've had these constant people

21:51keep on talking about 5 and 12 and 15 and 20% national home price crashes, and they're completely

21:57off. And then I realized none of them actually have a working model. This is why we do live debates

22:02on people because I want their name, face, forecast, and then models. If they had to explain their

22:07models, done, finished, absolutely finished. Think about if I had been talking for three years in a

22:13row, three years of price declines, cumulative of 19 to 22%. And I was saying prices are rising.

22:21And it went down 19 to 20. These people go, oh my God, you're a grifter. No, no, no. But when one of

22:26your own clan people do it, it's like, oh my God, that person is wonderful. Y'all are crazy.

22:32You all are crazy people. This is why being a doober for the last 15 years has been terrible,

22:38but y'all don't care because doom porn sells. That's what you want. You want subs, you want clicks,

22:45but you will go into the afterlife. And everybody says like, this was, this was your father. This was

22:51your mother. Literally doom porn posting all the life. So it is what it is. Some people have to make

22:56money. That's okay. My whole point with this was not to go into that. It was to encourage people to

23:01look at the tracker because we talk about the tracker a lot and there's all this. And I just

23:06gave the, and I just gave the best reason why you should do the tracker. I gave it. If you wanted to

23:10listen to those people and their models have completely failed them for a very long time. If you

23:15really, really wanted to know about this stuff, you follow somebody that has a live action tracking

23:19model. And then you could back test it and see what's wrong, but you can't sit here for like

23:23three straight years and say big price declines and then go, Oh my God, it's happening. Wait,

23:27it'll happen. And everything. No, it doesn't work right out. The model is more important than the

23:31forecast. Force them to tell you their models, visually see it. Like we show you our tracker

23:37every single weekend. You all could see how it works. Force them to give you their models. And they go,

23:42well, we copy other people's stuff and we don't really have a model. Really? No, I don't believe it. Come on.

23:49Well, everyone check out the tracker. We do that even though it's a holiday weekend. Logan will be

23:55spending July 4th night looking at all the data. Fresh data will publish that on July 5th. So you

24:02guys watch for that. Have a great weekend. Logan, thank you for being on. Happy 4th of July to everybody

24:08and even the American bears. But when you launch that firecracker, just remember you are not one of

24:15us, right? Us, us, proud Americans, United States of America. All American bears have failed since

24:211790 for raising. You all picked the wrong country to mess with. And we sit here in 2025 and all this

24:28doom porn stuff that has been happening for 15 years was wrong. Okay. We will. We'll end on that.

24:36Happy, happy 4th of July and happy birthday, America. All right. See you. See you next week, Logan.

24:41We'll see you next week, Logan.

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