- 4 months ago
On today’s podcast, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the Fed meeting and how Powell may have moved the goalposts on unemployment.
Related to this episode:
Fed holds rates steady as markets eye September cut | HousingWire
https://www.housingwire.com/articles/federal-reserve-interest-rates-steady-september-cut-inflation-labor-home-sales/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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.
Related to this episode:
Fed holds rates steady as markets eye September cut | HousingWire
https://www.housingwire.com/articles/federal-reserve-interest-rates-steady-september-cut-inflation-labor-home-sales/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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.
Category
🗞
NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the Fed meeting and the press conference that followed and how Powell has seemingly changed the game a bit.
00:17Logan, welcome back to the podcast on this very important day.
00:20A lot has happened on this Wednesday with economic data, with some commodity tariff news, and of course it's Fed Day.
00:34I'm going to say President Trump is probably upset with Powell's Fed presser, but boy, a lot went on this morning.
00:50Before even the Fed talked, and I think it lays a groundwork of uncertainty with Powell and Trump.
01:01It really makes Chris Waller look really good for the next Fed chairman.
01:07When I was listening to Powell talk, I was like, oh, Chris Waller looks to be the next Fed chair easily with some of the things that he talked about.
01:17Okay, let's start at the top with the economic data that came in and the GDP growth and what you think that means on the headline, but also when you get into it.
01:27So GDP growth beat estimates 3%, just like the first quarter, the import-export data just messes everything up.
01:36But the first quarter, we always talk about the Federal Reserve is really looking at the real final sales data of GDP.
01:47And they've always said, it's always been good and we think the economy is fine.
01:52The last two numbers weren't great, especially today's GDP print on real final sales.
02:01So the thing that they held their hat on for the GDP numbers is slowly fading on them as well.
02:11So in that regards, you know, a lot of people saw the headline beat, but when you broke down the numbers, you could see there's some issues with the quality of the report.
02:25And I think a lot of people who track economics understand that.
02:28There was a lot of tariff news on, you know, it appears that Trump is ready to kind of somewhat go to war with the, with the BRIC nations over Russia.
02:38So we could get very noisy over the next seven to 10 days, but ADP print came out last month.
02:48It was negative this month, 104,000 jobs created.
02:53But the Fed presser was really, really interesting with Powell, considering everything that's gone on.
03:00Okay, well, let's dive in there.
03:02What, from your perspective, what was the overall thing that you were like, okay, wait a second?
03:08So before we started the year out, we said that the unemployment rate is going to be key.
03:13And if the unemployment rate is the key, and if labor force growth is growing, that unemployment rate should rise just because the payroll data is slowing.
03:25I think everyone understands that as well.
03:28You know, payroll growth has been slowing for some time.
03:31But what's occurred is Powell said, well, there's not a lot of people looking for work anymore because immigration has slowed down.
03:40And that's the counter that we've talked about, that if the labor force growth doesn't grow, the unemployment rate can stay lower for longer.
03:50And he had really, really highlighted the unemployment rate more than any other time that I've seen, because he's using that now as cover.
04:00Because do you know why, Sarah?
04:02Labor over inflation?
04:04No, no, no.
04:05He's being very clever here.
04:07See, if Trump figured out what he was doing, Trump would be fuming.
04:13Because immigration has lowered the labor force growth, the unemployment rate can stay lower.
04:18And he's forcing that, even though the private payroll data, I mean, so much of the healthcare services, government jobs, those have been the big drivers of job growth.
04:27But even with private payroll slowing down and him acknowledging that, he just kept on talking about the unemployment rate and that the supply of workers are lower.
04:38So unlike Christopher Waller, who says the private payroll growth is not doing good, you know, others saying the housing market is in a recession, you know, where Chairman Powell was talking about the housing market is a special case.
04:52It really left, like, not a clear signal out there.
04:58You know, of course, we're going to have two job reports and inflation reports before the next meeting.
05:03But I can't imagine Trump would be happy, you know, because, you know, oddly enough, in some weird way, he was almost trolling Trump.
05:15Well, immigration is not here, there's less people looking for work, the unemployment rate is low, that's our, we believe we're at full employment.
05:22So where Christopher Waller and Bowman and some other people might say the private payroll is slowing down a lot.
05:28If you didn't have government jobs, you know, it would look worse.
05:30And Powell kind of said, yeah, but, you know, the unemployment rate is low and we don't see layoffs yet.
05:37So hypothetically, you could have, like, five straight reports of 60,000 jobs being created and they wouldn't budge in theory.
05:46But he did acknowledge that there are some risks to the labor market going out.
05:51And I was like, risks?
05:53If you're talking about risks, then you should be a neutral policy.
05:57And, you know, so it's one of these things with back and forth.
06:00Well, inflation is above target.
06:01We're not quite sure about the goods inflation, but we just want to make sure it's a one-time price hit.
06:07We see deals being made, but we don't know when it's all said and done.
06:12So I just can't imagine Trump would be happy with that.
06:17So interesting.
06:18Maybe the ref is tired of the bully ball and like, oh, yeah, you think you're going to push me around?
06:23I'm just going to be like, yeah, I don't think we need to do anything right now.
06:26Yeah, so it does become, you know, an interesting aspect where even if the jobs data missed estimates, but the unemployment rate didn't budge.
06:39I mean, under this premise that Powell under, I mean, from what I saw him say, yeah, that's not going to, that's not going to do it for me.
06:48It's going to do it for Chris.
06:49Well, I thought this was a great, this was a great introduction to the next Fed chairman, Chris Waller.
06:54So that's, I mean, that's part of the take that I got that if you are Chris Waller, you're basically, Powell is showing you why you want to replace him with me.
07:05So very interesting on that.
07:07I don't know how many people caught on to that, but I mean, for us, it was, it was our main talking point going into the year with the unemployment rate.
07:15It will rise if the labor force data is growing because that's, you know, smaller jobs creation.
07:22But in this case, wow, boy, that, that was a very interesting and it gets, it becomes a very interesting setup with the jobs data now that you can have maybe a very low headline print and not have it mean that much.
07:36Well, we'll, we'll see how that goes.
07:38You're going to get, obviously going to get a lot more discussions, but there was, there was a two Fed dissents, not shocking.
07:46Bowman and Waller both wanted rate cuts.
07:50But I mean, all this is like, we're fighting to see when to get to neutral policy.
07:55This is nothing like Trump wants.
07:56Trump wants 3% rate cuts.
07:58He talked about it in the morning, said the economy beat estimates, GDP now let's get rates lower so people can buy homes and refinance.
08:05And again, that's the Trinity, right?
08:07That's the, the, the, the rate story is the last.
08:11Could you imagine if mortgage rates were at 5.75% today?
08:15Ooh, no.
08:15You know, instead of 6.75, Trump would be ecstatic.
08:20Demand would pick up, you know, wouldn't be spectacular or anything with demand or pick up, you know, permits might be able to grow.
08:27So it is, it's, it's such a fascinating thing.
08:30And, and how Powell talks about housing, he just keeps on saying, there's always, there's a shortage of housing that he doesn't ever talk about like the demand side of it.
08:38He just says it's weak, right?
08:40Someone needs to be a little bit more clever in asking him about housing.
08:44And I don't think anybody on that, uh, uh, uh, media side knows what to do it.
08:50So I'm going to volunteer myself, you know, to kind of drop out.
08:53Cause he keeps on saying, he keeps on answering it the same way, uh, in that regards.
08:57And of course you don't, you're not, we're not talking about three.
09:00We're not talking about four.
09:01We're not even talking about 5% rates, but getting down to six would alleviate some of the concerns that a lot of people, including the public has.
09:10But, uh, again, that's not ultra low policy where, you know, getting moving, uh, mortgage rates down to 6%.
09:17And now that inventory is back to 2019 levels, the supply and demand equilibrium is, is, is different now.
09:23So fascinating.
09:25I think, I think this, this, this fed presser was for the nerds.
09:30Like you really had to go to the underneath stuff to kind of talk about it because we, you know, we've said that the Powell's used the real consumption data as, as, as, as his protector.
09:39And that has kind of faded and he's acknowledged that and he's acknowledged, well, there could be some risks to the labor side.
09:45But so again, all this is still always how to get to neutral policy.
09:50If the labor data starts to get worse, but if the unemployment rate doesn't move up and jobs numbers keeps on falling under this talk today, be like, eh.
10:01So I thought a good day for Chris Waller.
10:03This is crazy because that has been our premises, labor over inflation.
10:07We could say, here's what we can count on.
10:10And it seemed like he changed the rules a little bit.
10:12Well, I understand what, what, what he meant that the unemployment rate can stay low, even if the labor data gets weaker.
10:20What he didn't show concern for is the private payrolls.
10:25And he kind of, he admitted, yeah, the private payrolls are narrowing down on less growth, but he kept on going back to the supply.
10:31And when you keep on going back to the supply of workers, you're using that unemployment rate as your cover target right there.
10:37So if the unemployment rate does pick up, you know, it should be a little bit weaker on that front.
10:44Okay.
10:44So let's talk about how the market reacted.
10:46What did 10-year yield do and where are mortgage rates?
10:4910-year yields, oddly enough, 10-year yield spiked up in the morning after the GDP report and the ADP report.
10:58Mortgage pricing actually before the Fed, what I saw, was actually positive, which means the spreads got really good today.
11:05I mean, one of those, one of those days where we always talk about mortgage spreads being very critical.
11:09I think this, this morning was one of those days where you could have bond yields go up and the rates go lower.
11:15However, I didn't, I don't know what it is right now at this second, but before I got on here, I said, whoa, this was a great spread day.
11:23Just for everybody, mortgage spreads is another great story for housing because it would be a lot worse with rates if spreads didn't improve.
11:31And we're starting to teach people mortgage spreads.
11:33I'm really happy about that, you know, because nobody knew what it was, but it's so important.
11:37Okay, so it seems like people are eternally hopeful and they're like, no, September rate cuts look like they're in, you know, that we could maybe get those.
11:49What's your thought about September rate cuts?
11:51I mean, it's, it's when you start to get dissents in, in the, you know, remember we wrote that or we, we did that podcast a while back, the get ready for the Fed civil war, where you start to get more dissents.
12:04It, you know, we're, we're going to have to start like really being meticulous on what Fed presidents say now, uh, after economic data, because now there's a, there's a clear divergence where some people want rate cuts and the people that want rate cuts will be the next Fed chairman possibly.
12:22Uh, um, again, we're team Waller here.
12:25Uh, and, uh, uh, in this case it, oh man, it's going to get interesting.
12:30It's going to get nitty gritty interesting.
12:32So my job is to take the really nerdy side of this debate and try to make it understandable, but we could start to see the, you know, how Jerome Powell will be less relevant going out until he leaves.
12:47Because if you already have dissents by two people, that could be possibly the Fed chair, he's not going to be on the podium anymore.
12:56And the Fed chairman can rile up, you know, the troops in a way.
13:01And I think what I believe Waller is the best person to do that.
13:05Not Kevin Walsh hashtag anybody, but Walsh, nobody wants Walsh.
13:11Okay.
13:11We don't see him really coming to the fore, but I mean, I mean, it's just, he's, it's like a weasel.
13:16It's like somebody who just like, I'm all about rate heights, rate hikes.
13:19Oh, no, we're going to cut like, you know, great.
13:22You know, there's just some, there's just, no, there's, you know, you know, that kind of guy that he's just all about one thing.
13:29And all of a sudden to gain something, he just completely sells his soul out.
13:33No.
13:33So Walsh, no, but, and plus that the, the Fed presidents hate him.
13:38So it's just like some guy who makes fun of all the Fed and then he's going to come and be in charge.
13:42It's just like, whatever, get out of here.
13:44But Waller could kind of round up stuff.
13:46So I just, why, it just, it made it very interesting.
13:50Like the nerdy side of me is like, wow, that was really interesting because we had talked about the supply of workers being, being an important factor.
13:58But if it increased, there was one thing, but now they're using it as cover for the, for the low unemployment rate.
14:03Ooh, that's got to, somebody's probably explained that to Trump and he's probably furious, you know, but we'll see.
14:10We'll see how that goes.
14:12But I thought it was a fascinating, nerdy Fed press meter.
14:16I know you loved it.
14:17Okay.
14:18So we still have jobs coming out.
14:20What could, what could that change?
14:23Given this new sort of dynamic, the way that Powell's looking at it, what would it take now to have a rate cut or the bond market to get ahead of the Fed based on the jobs report?
14:33Okay, so we might give back a lot on the government job side.
14:39Let's, let's give you two hypotheticals.
14:42Let's say, let's say the jobs report came in at 53,000 and the unemployment rate did tick up.
14:50The bond market would go, okay, now you're really pushing it, but you could also have 53,000 jobs report and the unemployment rate fall or stay flat, you know?
15:06And then under Powell's discussion, he'd be like, well, the labor supply is lower.
15:10So the unemployment rate is good.
15:12So it gets interesting on that side that, you know, you could have a really, and he did acknowledge there is risk to the labor market, but it is interesting to see how the bond market reacts to something like this.
15:26Because as we have seen before, three different times, the bond market has gotten well ahead of the Federal Reserve.
15:33All three times it's been refuted because it's not breaking.
15:37And for us, it's always been paper, rock, scissors, labor overinflation.
15:40The labor market has to break for them to actually like take it to the next stage.
15:44And here we are with two more reports left.
15:47And then now some of the, you know, more prominent stuff of the tariffs coming in and we're collecting revenue.
15:54So it really, as we talked about starting from, you know, July 1st, the second half of 2025 is going to be lit.
16:05It's going to be a lot of fun.
16:06It's going to be a reality show of nerds and chart daddies on the island and the economic love island is going to have the chart daddy win it all because we're going to, we're going to find a way to like make this, make this work and make sense for everyone.
16:21The things you come up with are so funny.
16:26A chart daddy love island of economists would be ridiculous.
16:30That is hilarious.
16:32Oh my gosh.
16:34So if you're sitting out here and you are in the housing industry, what's your takeaway?
16:40Well, your take is that you have now people on your side, right?
16:45You now have the potential next Fed chairman who's going to be, you know, a little bit more pro housing.
16:52You have a lot of people already talking about, well, the housing market's in a recession.
16:57We need to do something about it.
16:58You have a consumption data line that the Federal Reserve has, you know, held its, because Powell's talked about this, modestly restrictive, modestly restrictive, modestly.
17:09Oh, by the way, we, you know, the economy isn't acting like we're modestly restrictive, but we believe we are.
17:15So it is, it is just this discussion from getting from this point to neutral.
17:20That's it.
17:22If people are looking for like 3% rate cuts and stuff like that, you got to like toss that aside.
17:29So there is a positive in that side that we, we, we've entered a realm of dissent and we've entered the realm where the head person who should be running the Federal Reserve next, it would be kind of on the housing side where Powell is just now on the other side is saying labor over inflation.
17:49Logan was right about me since 2022.
17:51We are just going to wait till this sucker breaks and then we'll go, we'll play catch up.
17:56But it is a positive in that side that we finally entered the dissent stage and we'll take it from there.
18:03And again, a lot can happen from now.
18:06This is why we track economic data daily.
18:09This is why we do the tracker.
18:11So we can highlight that the spreads are really good and it's really kept things kind of at bay.
18:17Another thing, purchase application data came out today.
18:2117% year over year growth.
18:23Sounds great.
18:24Week to week down 6%.
18:26The year over year growth is a new listing story.
18:29The week to week data is not as strong as the year over year growth.
18:34So if we didn't have the new listings growth, I don't believe we would have had this kind of, I mean, it's like 26 straight weeks of year over year growth and purchase apps.
18:41It's 13 straight weeks of double digit year over year growth.
18:44And I still think that a lot of that is most sellers are home buyers.
18:47So that's the housing economic data of the day.
18:50But I think this is very fascinating.
18:53I'm very excited.
18:54Can you see how excited I am?
18:55I'm ecstatic about this.
18:57This gets into the meticulous, nerdy side of economics with Powell and Trump.
19:02And Laura, I don't know how Trump is going to react off of this.
19:07Who knows?
19:07By the time we're done with this podcast, we get to go see.
19:09I mean, by the time it's done, anything could happen, especially with Trump and Powell.
19:16I mean, like, I don't know.
19:17Kung fu fighting is going to break out.
19:19That's what it is.
19:19Yes, kung fu fighting, like that video I made.
19:23Logan, thank you so much for being on this important day.
19:26And we will talk to you again tomorrow.
19:28My pleasure.
Be the first to comment