- 4 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the big miss on the jobs report and what it means for Powell, rate cuts and mortgage rates going forward.
Related to this episode:
July jobs report miss puts September rate cut and lower mortgage rates in play | HousingWire
https://www.housingwire.com/articles/july-jobs-report-miss-puts-september-rate-cuts-in-play/
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:
July jobs report miss puts September rate cut and lower mortgage rates in play | HousingWire
https://www.housingwire.com/articles/july-jobs-report-miss-puts-september-rate-cuts-in-play/
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.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the big miss on the
00:13jobs report and what it means for Powell, rate cuts, and mortgage rates going forward. We have
00:18so much to talk about, but first I want to thank our sponsor, Optimal Blue, for making this episode
00:23possible. Logan, welcome back to the podcast, and we are doing a special Jobs Friday podcast.
00:32You know what's interesting about this week? For those of you that have listened to our podcast,
00:37by the way, the award-winning podcast having us now four times a week, do you see how valuable that was?
00:44Eventually, I'll break you down for the fifth one, but in any case, people accuse me of knowing the
00:50report because of what we've said the last two podcasts about the private payrolls are slowing
00:57down. Head's ignoring that. They're going to run on the unemployment rate. The unemployment rate
01:03might not go up as high as it should have because of the labor force growth,
01:07and it's not the best position when you're not in neutral policy. Of course, Friday morning,
01:1573,000 headline drops print. That's probably going to get revised lower too.
01:24When we were expecting 100,000, right? People were expecting 100,000. But it's also the main thing is
01:31that these were the worst revisions I've ever seen in my life because I was born in 1975.
01:37And in 1973, if I take COVID out of the equation, most people should take COVID data out of the
01:44equation. This was the biggest negative revisions in history since 1973, 253,000. If I do a three-month
01:54average, it's 35,000 now. Oh, wow.
01:59Now, old, slow. Who do I see on TV this morning? Beth Hammock. Beth Hammock, who we have talked about
02:10many times, the lady who says, the Fed president of Cleveland Fed, who said, oh, we'll play catch-up.
02:16She says, oh, this is one report. No, it's not. It is not one report. You would be fired as an analyst
02:23if you said that. It is the revisions. It is a trend that has been here for 19 months.
02:31It is the personal consumption expenditure data going negative. What are you people looking at?
02:38Sorry, I had to get that out. It's good to get it out of your system. I know it's been-
02:43I sat there and I watched her on Bloomberg and I said, she did not say that. And we've picked on
02:50her. We said, she's going to be the one this year. Is she the one that said, we'll just play
02:54catch-up? We'll play catch-up. I don't know what's happening, but we'll play catch-up.
02:59And she said, oh, this is just one report. No, it's not. No, it's not one report. It's a negative
03:04origins. It's a trend. So in any case, 10-year yield waterfall diet. So that 435 level was holding
03:11a total. We break below 435. Where Fed policy is, the market is telling you the Fed is behind the
03:19curve on this. So, but sticking to economic cycles, right? What do we, we want to teach
03:26economic cycles because if an educated class of people know how to read data, then they don't
03:31get suckered by fanatics. The residential construction labor that we have harped on, we said, we got
03:39to keep an eye on here. If this is not breaking, you're not going to get a recession. Now with
03:43the negative revisions, four straight months of decline. And one of the things I've always said
03:50is that the Fed tends to ignore this. When this ever happens, they tend to ignore it. And then they
03:56go, what happened? You know, I will do whatever I can physically to make sure the Fed does not ignore
04:07it this time. I've seen this happen in other cycles. I have no way are they ignoring this one. So I even,
04:14I even tweeted this out this morning. I said, homies, this is now, this is now falling. Housing starts and
04:22permits have been in a recession for many years now. Completed units are up to levels that we have seen
04:29post-1960s where the builders go, oh boy, you know, and they got a huge backlog. I'm like,
04:37so thankfully the long end of the market does its thing, right? Remember the, the, the bond market
04:44always leads the Fed, the Fed's play catch up. But this is not like the last few times where the
04:49Gandalf line, I can say, hey, listen, this is not breaking. If Hodor was here, I'm like, boy, I've lost,
04:59I'm losing the residential constructions claims would be the next stage F. So this is a little
05:04bit different than the last few years where I make sure to kind of hold the line. So it's not fun and
05:11games anymore. You know what Trump should do? Trump should have me just debate Powell live on air.
05:16Not only that, bring me his top Fed, Fed staffer data miners and let's go at it, you know, because
05:25you can't, you know, it's just one of these frustrating things. I'm not Trump where I want
05:313% rate cuts to emergency rates, you know, no, no, no. But you should have been a neutral. I'm just
05:36sticking to my old policy. Going back to 2022, we said the Fed is going to do something that's going
05:43to piss a lot of people off. They are going to wait until the labor market breaks because they're old
05:48and slow. And then they're going to go, okay, we can do this. So now if I went back in time,
05:55if I went back three months and those negative revisions were there, you would have had seven
06:04descents for rate cuts in the last meeting. So we're at that stage. Now we've always had bad reports,
06:13positive reports, beat reports, whatever, but it's the trend that matters. And it's not just
06:19the labor data of the private payrolls. We've been highlighting the private payrolls for my God,
06:23even the last month, the frustrating thing was, we talked about this last month. We said,
06:29if it wasn't for federal workers, we'd be talking, oh my, the labor market's getting really softer. But
06:34this whole month was wasted because of one government jobs print out here. So hopefully,
06:40Jerome, Neil Kashkari, Austin Goolsby, Lori Logan, Beth Hammock, the Fed presidents,
06:51you are no longer the data miner kings and queens of this nation. Logan Monashami and his crew
06:58will challenge you because this looks like we need to be closer to neutral policy.
07:04And neutral policy will still be above the growth rate of inflation.
07:08But now we're here. This is what we're dealing with now.
07:13You said in your article today about, we're recording this on Jobs Friday, obviously,
07:18you said in your article about it that like, if they'd had this information, if they'd had this
07:23jobs report in hand just a few days ago, right, before they met, they could have, I mean, you think
07:30for sure they would have cut rates.
07:32I don't trust Powell anymore, but I'm sure there would have been more dissents.
07:38Okay.
07:39Because it is quite difficult to have three-month average of $35,000, and now residential is breaking.
07:50See, you got to get these people in debates, and you got to show them because what Trump is doing,
07:56Trump's bully ball tactics, and by the way, last, we talked about this yesterday, Trump should
08:00announce Fed chairman Christopher Waller this afternoon. Stop wasting time. Every day that
08:09goes by, you're wasting time. Get this party started. You have all the cover in the world.
08:15You have the greatest cover in the world to do this, and nobody will doubt you on this now.
08:20Well, he did come out today, and I mean, he called Powell names and said he has to cut
08:27rates right now, and if he didn't, he would have the board do something.
08:32Sarah, what would I do right now?
08:36You would make sure, you would have a Chris-
08:38I would go on the podium right now and go, I'm nominating Chris Waller as the next Fed chairman.
08:45He is the shadow-fed president until Jerome Powell leaves his post. I would end this construction,
08:53whatever this stuff is, and I go, listen to this man. This homie's leaving. This man is the future.
09:02He is the past. That's what I would do right now, but I'm not the president. So I'm telling,
09:09I'm trying to be as respectful as possible here because we understand the BLS data. There's
09:20underfunding. There's a lot of stuff going on, and it's a very tricky cycle, but we have models
09:27in the past, and we go back to 2022 when Jerome Powell went on TV and said, we would like the Fed
09:34funds rate to marry three, six, 12-month core PCE. This is not asking rates to go below inflation
09:42or on par with inflation, but get it toward a neutral policy so we don't have to worry about
09:48residential construction workers losing jobs in the four months, and you do not, under any
09:53circumstance, want residential construction workers and manufacturing jobs being lost at the same time.
09:58That's the death nail of economic cycles right there. You can have a manufacturing recession.
10:04We had that in 2015 and 60, no recession. We had manufacturing jobs lost last year, no recession.
10:10Now you're just playing with fire. You don't need to. It's just like, oh, old and slow, labor
10:19overinflation. I hate it. I hate it. I knew this day would come, and you didn't need to do this. You
10:24could have just got a little bit lower and moved. Now, thankfully, on the positive side, mortgage rates
10:30are below 6.64 today. So we are officially in that starting range of rates where in the past
10:37things get better. When rates get towards 6%, the builders get happier, right? And oh, demand picks
10:45up a little bit. Then they start, okay, we can build homes, right? So as always, thankfully, the long
10:52end of the market, which matters, is going to do a lot of the early work for them. And next time,
10:58if rates get down to 6%, Lord have mercy, if you have another Fed president come out and say,
11:03they're buying homes again. I don't know. Oh my God, they're going to have sex, and they're going to
11:09buy stuff from Ikea. How are we supposed to rebalance it? Oh, no. If you don't want this job,
11:19go fishing. Go to Cancun. Go fishing. Go to Alaska. That's right. Don't go to the Love Island
11:26for economists like you do. Oh, yeah. A lot of people were asking,
11:30chart Daddy Love Island. Oh my gosh. That's going to be the next reality show.
11:34Let me just tell you the comments. I knew it was going to be unhinged, and I was right.
11:41Okay, so I have a question about the revisions, because this is something that is confusing to the
11:46layperson, and there is already a huge conspiracy that the government is somehow manipulating the
11:53data. So how do you get revisions this big? How are you off that much in May and June?
12:00So let's talk about what did we see in the data that was concerning to us? We saw the consumption
12:07data start to slow down. Now, what happens... Are you talking about in those months?
12:11For the first half of 2025, right? The PC consumption data, it's actually really where
12:17I did a video of it on Instagram stories. That was getting really nerdy to me, because I don't think
12:22anybody's ever seen that data line. In any case, the private payrolls have been slowing down for some
12:28time now, and housing starts... I mean, we've always highlighted this. It is very rare to have an
12:36economic expansion when housing permits are in a recession. It does not occur. So the total units
12:42being completed, right? This was the whole supply and demand equilibrium argument we made in December
12:46of 2024 that the builders are in trouble here unless rates go lower. I mean, how many articles did we
12:52write in the last five months about this? But when we talk about negative revisions, we're like $400
12:59trillion a country. We're like the wealthiest. I always say maybe Cleopatra adjusting to inflation
13:06had more or just the same amount of wealth as the US. But our government data trackers are not being
13:14funded. Thank you, Doge. We've had revisions this big before, but it's 1973. What happens with surveys,
13:24if you do not have the capacity to run proper surveys, you're going to get nasty revisions,
13:31both up and down. So if I was Trump, I'm just, you know, putting money back. You got all this tariff
13:39money. You got all this tariff money. Put some into the BLS. Make sure you can get the data correctly.
13:47And then maybe you can get your lower rates faster than you want. In any case, what happens always is
13:53you're going to see tons of negative revisions because what happens is the following year,
13:57you get the tax data to confirm about these jobs. So you can have revisions out to five years.
14:05We always used to show this chart where you see these positive revisions and negative revisions
14:09going back decades. So it's not uncommon to get revisions. But here, I care about the trend. The
14:17trend has been slowing down for some time. The consumption data that the Fed held their hats
14:23on has been slowing. So I was like, homie, come on. What are y'all doing? So, but I mean,
14:31on a positive side, that, boy, Jerome's going to have a hard time. I mean, I could not have thought
14:40of a worse jobs report for him than this because of the negative revisions, because residential,
14:47because he says, housing's weak. There's not going to be enough supply no matter what. We don't give
14:54a doubt about that. Housing's weak. Housing starts going to recession. Residential construction workers
15:00lose jobs. That's a first level labor trigger for every recession we have seen in recent modern day
15:06history outside of COVID. So it's just, I can change them. I can change them. Get me to the federal.
15:15Let me, let me take their data miners and we could run correct proper models to talk about this stuff,
15:21right? Cause it's not, it shouldn't be that difficult. They're all, y'all got a lot of
15:26cities out there. The Fed cities follow me. I know the staffers are listening. Reverse your old model
15:33trends to update to the current equilibrium of housing data. Come on. It's not that difficult.
15:39I'm pleading myself to the people who I know are listening to this. You are, there's no reason to
15:47even be in this position. I should be listening to you, Logan. Of course they should. Okay. So you
15:53talked about how, um, you know, the 10 year olds down today, mortgage rates are down below 6.64%.
16:00What does this mean for September rate cuts? What do you think could actually happen now?
16:05So now this becomes interesting because we're going to have another jobs report.
16:10We're going to have, you know, I, one of the things we always said is that the Fed really,
16:16really weighs jobless claims data, because if, if I'm to believe I'm correct, that the Fed's going to
16:21wait till the labor market breaks, then jobless claims is always going to be their, their key.
16:25But now they have an early labor trigger that really gets ahead of the jobless claims breaking data
16:31line. So, um, of course, September rate cuts are in play, but now is this going to be a repeat of
16:38last year that we get half a percent cut, you know, and then the federal reserve a year for next year
16:46and, you know, says, Oh, well, we were, we, we waited too long, just like they did last year.
16:51Oh my, literally, we might have that same thing. They could have cut and then they wait till September
16:56they cut, but now it's, it's a little bit different because the curve is lower and the Fed funds rate
17:00could get to a lower base. So it's, it's one of these things to where, as you could all see the
17:07bond market cares more about the labor data, right? You know, and, uh, and we talked about this this
17:14week that even with a hawkish Fed and all these things happening, the growth rate of goods, inflation,
17:21picking up the bond market really didn't break up higher, but here it's just a waterfall.
17:25Dive. So my best advice to all the Fed presidents, some, somebody, somebody gets some media help for
17:33Beth hammock. My God, you cannot literally come on TV and say, this is just one report. No, it isn't.
17:40It's the revisions. It's the consumption data. You do not have the luxury of being disconnected
17:46this much anymore. All right. So we need those media help people. What are they? Those, those,
17:51uh, like whenever a celebrity does something stupid, there was like, they, we need, we need
17:58something I had just to like, you don't need to lose the cycle. Just get to neutral. So what are
18:06the chances that just like last year bond market gets ahead of the Fed? We see, you know, four to
18:11six weeks of, um, more demand purchase applications, pickup. The Fed goes ahead and lowers rates and,
18:18and mortgage rates go up just like last year. The, the, the, the difference, the difference is
18:23that, uh, the Fed funds rate was much higher back then. Okay. So the half a percent cut was playing
18:29catch up. When, when the Fed says they're playing catch up and they were too late is that, you know,
18:34380 was too low. 450 was about right. So this is why I always say 435 to 470 looks right, but you get
18:43rate cuts where the 10 year yield is now hypothetical. Let's just say the 10 year yield
18:47is at the Gandalf line at 3.37. Okay. And if the Fed cuts and then all of a sudden the data gets
18:54better, the 10 year yield should move up toward 4%. I'm just, you know, we're, we're getting to the
18:59point where it's easier to get down to the 4% on the 10 year yield and stay there and not be shocked
19:04with, with, with data. So again, the counter to everything is that the economy re-accelerates
19:11and the growth rate of inflation, right? The whole case of, we, we made that whole podcast,
19:16just like what, what can happen for the, uh, uh, no Fed rate cuts at all this year. The economy has
19:23to outperform. The labor market has to outperform the labor market. Can't deteriorate because the
19:28Fed has a dual mandate. Their mandate does not care. We wrote that. Was it three months ago,
19:32two months ago for Trump? Stop talking about net interest payments. That's not what the Federal
19:37Reserve does. That's not part of their mandate. That's the Congress didn't even dedicate them to
19:42do that. So net interest costs is not what they care about inflation and labor, right? So if the
19:49labor market is deteriorating, they can do this. So at least this is a whole different backdrop now,
19:54because what happened last year, always remember this, everyone, we had a 2% rate move lower with no
20:01rate cuts, but the 10 year yield was whoa, well ahead of the Federal Reserve. So the Fed cutting
20:07half a percent was still like, they, they could have cut another half a percent the next meeting
20:13and the 10 year yield was still well below that. So we're in a much more balanced spot to where the
20:18Fed funds rate is in the 10 year yield. Now, if today, if the 10 year yield was at 360, that's a
20:23different conversation, but it's not, it's like last I saw is 423. So we can save them. Sarah
20:31Wheeler, we can save the Federal Reserve for making this common mistake they have done over the past.
20:38They should listen to you and our, our housing market, our housing market peeps, they need this
20:43because if there's no reason for this, if this is what should actually happen, I mean, at the same
20:48time, you're suppressing the housing market and you're suppressing people who want to buy homes and
20:53you know, all of the things that, all the good things that happen after people buy homes. When we
20:58talk about economic cycles and housing, it's, it's really residential. It's housing construction. And
21:03usually in an expansion, permits are rising, not declining. They've been declining for a very long
21:10time. So they've ignored it for what, three years now. They've ignored it, ignored it, ignored it.
21:18Now that residential construction workers are losing their jobs, they can't ignore it anymore because
21:25this is where we, I've been here before. And if you see this, it's happening and they go, uh, well,
21:33the general economy, no. So I'm hopefully, hopefully Jerome and everyone, Jackson holds the
21:40next time that they're going to have a fed talk. We'll be there. There'll be some more of a
21:44discussion. But if, if Trump really wanted to do something and forget these tweets or truth
21:51socials, by the way, I got back on truth social again. Oh yeah. They, they reinstated. I said on
21:58my Instagram stories that I got banned because there's a fake Logan Moshami. And then the truth
22:02social follows my Instagram story. So then the guy said, Hey, Texas might Texas me and says, Hey,
22:07I got you back on. I was like, Oh, okay. You know, um, the truth social posts against Powell
22:14are not an effective measure, but you have a plan in place. Beset created that plan for you to pull
22:21the trigger when you need it. You have the greatest cover in the world to do this. Now
22:25take the shot, right? Don't, don't hold back. Be Trump, be like, be, be over the top Trump.
22:35This is a time where you could be over the top Trump, you know, and you'll get people to back
22:40you up on this, but man, what a week, what a week, Sarah Wheeler week. That is, this is like
22:46the super bowl for nerds. I'm loving it. So much excitement, but man, I just saw those revisions
22:54and the residential. I was like, Oh, thank you so much for coming on this bonus episode. We had
23:01to do it extra. We're putting this out on Saturday just because this was such a huge
23:05jobs report for everybody in housing, looking at, at mortgage rates and what can happen. So thank you
23:11for being on and thank you for giving great advice to the fed, to the president, to all the people we
23:16know are listening. Sarah pleasure. And as we said on July the 1st, the second half of 2025 is going to
23:24be lit popcorn, everything. I did not know how much short daddy cook because this is going to get even
23:31more fun later on. Thank you. Bye.
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