This might be the most important jobs week yet

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about this jobs week and what he expects from the all-important jobless claims data.   Related to this episode:   ⁠The battle over rates: Trump vs. Fed Chair Jerome Powell | HousingWire⁠  https://www.housingwire.com/articles/the-battle-over-rates-trump-vs-fed-chair-jerome-powell/  ⁠⁠⁠⁠⁠⁠⁠⁠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 o

Transcript

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

00:11very important jobs week. Also, we'll get into the Fed drama a little bit, but we're so excited

00:17to dive in. First, I want to say thank you to our sponsor Optimal Blue for making this episode

00:23possible. Logan, welcome back to the podcast. It is wonderful to be here. I'm in lovely Lincoln

00:28City celebrating my 50th birthday. I'll be climbing rocks soon, ziplighting. So if something

00:36ever happens to me, it has been a wonderful journey defending America against the American

00:42Bears for the last 14 years. I love it. Okay, so huge week this week, a jobs week like no others

00:49coming up before that September Fed meeting. So tell us what to expect. Do we have job reports

00:56coming out almost every day this week? Yes. And of course, this is Friday morning. The

01:00PCE inflation data came out. By the way, bond yields ticked up just a little bit. Mortgage

01:07rates were flat for the day. The spreads are doing their thing. It is so wonderful to see

01:12all the other economists and everyone else starting to kick. We were doing spreads before it was

01:17cool, before it was a thing. And it's just, it's beautiful to see it work as it has through

01:22every cycle. It has. So we're recording this on Friday, but it's going live on Tuesday. So we'll

01:28talk about this week being the jobs week. And again, the labor over inflation argument now

01:35with jobs week is going to be critical because this is the last jobs week before the Federal Reserve

01:40meets in September. So a lot of people were thinking, why is the 10-year yield, you know,

01:46at 420, 424, you know, this Monday pricing, again, 65 to 75% of where the 10-year yield and 30-year

01:56mortgage rate can rage is still somewhat Fed policy. And as the two-year yield starts to come

02:04down, as a three-month yield starts to come down and you get more short-term pricing, this doesn't

02:09mean that the 10-year yield can't spike up and everything. For those of you that were in the

02:14industry in 2013, we had zero interest rate policy. And the Fed talked about, you know,

02:20the taper and bond yields shot up from 160 to 3%. Mortgage rates went up 1% back then to 4.5%.

02:27People were freaking out. Times have changed. But now we're going to get to see a good test.

02:33We have the inflation data already in place. Of course, the growth rate of inflation is not

02:38heading back down to 2%. And now we get some more goods inflation probably kicking in here.

02:44How does the bond market react if the jobs data gets better?

02:50This is the question, right? This is what I feel like you're the one who's been looking at this.

02:56And, you know, for our industry, of course, we never want the people to lose their jobs or go

03:01into a recession. But lower mortgage rates is key to our industry. So, you know, everyone's watching

03:07like what happens.

03:08And this is the thing. With the spreads being better now, it's not a biggest impact as it was,

03:16let's say, in 2023, where now we are seeing lower mortgage rates with higher yields now. But

03:24to me, the last jobs report, last BLS Friday report, we have job openings, ADP, jobless claims.

03:31What it showed was that the Federal Reserve really does need like the labor market breaking,

03:38right? I mean, we're sitting here with a three month job average of 35,000 per month. We're sitting

03:45here with manufacturing jobs being lost, residential construction jobs being lost, especially trade

03:50construction jobs being lost. And it's okay, because we're not a neutral policy yet. We're heading

03:58toward neutral. It can get there maybe at the end of 2026 or 2027. But in any case,

04:04we're not at neutral policy based on what the Federal Reserve is telling us, right? It doesn't

04:08matter what I think or stock traders think or YouTubers think, the Federal Reserve believes

04:13they are modestly restrictive. This is why Waller and that group of the Federal Reserve, remember,

04:17the Federal Reserve has a civil war now. Remember, we wrote about that months ago, we said,

04:22get ready for the civil war. And we have this civil war. But the question is, it doesn't take much to

04:29make the labor data look fine now based on the Federal Reserve. They're telling everyone, well,

04:34if jobs are just going at 50 to 75,000 a month forever, it's okay, because population growth is

04:41they have a very low bar for the jobs data. If it comes out at like 155,000 or something like that,

04:49and you have positive revisions, the Federal Reserve, some members could say, hey, listen,

04:53the labor market isn't breaking. We need the labor market to break for us to get even more

04:58dovish. So the conflict is here. We've been setting up this conflict for since the end of 2022,

05:06you know, labor overinflation. And now we have different factions of the institution ready to

05:13fight each other with. So I think this, out of all the jobs weeks that we've had since late

05:192022, this will be the most fascinating to see what the bond market does, because

05:23Jerome Powell's is coming to an end, right? His tenure is coming to an end. But who President

05:30Trump picks and how many votes does he get? You know, there's more stories about Fed Governor Lisa

05:36Cook today. You know, it's just one of these things where I really would love to see how the bond market

05:42reacts if the labor data just beats estimates and where this can go. Because it really took

05:48one of the weakest three-month average of jobs creation in the 21st century for the bond market

05:55to basically slap Jerome Powell in the hand with a big old rule or two, just wha-bam, you know,

06:02and say, yep, it's labor or inflation, and you've lost your labor cost. So that's a good thing,

06:07because there's a lot of Fed governors. Beth Hammock and everybody says, oh, listen, we should

06:12be cutting rates. So there's a good conflict between the Federal Reserve, and now there'll

06:16be a good conflict between the bond market and the labor report. This is so fascinating for me,

06:22because I've been waiting for this for a long time. It's interesting, because even people who

06:25never don't even know there's a jobs report, I think right now are paying a lot of attention. Of

06:30course, people in our industry pay attention. But it's when you have relatives who you know know

06:34nothing about this, they're not in the industry, and they're asking you, and you're like, wow,

06:38it is definitely, this whole Fed battle has definitely penetrated all the way to Main Street,

06:43like people know about it. So here's my question for you, Logan, with that $35,000 a month,

06:49over three months average for job growth, what is the expectation for this jobs report that we have to

06:55beat? You know, it's funny, nobody trusts the BLS jobs reports, and now President Trump has his own

07:02guy in there. This is just basically a kind of a toss-up to-

07:09Okay, wait, do you trust the BLS jobs report?

07:11I mean, the BLS jobs report is a trending jobs data that has been correct, if you look at it in

07:19the correct way. There's always revisions out there. I would say that what happened last year

07:24is that the jobs data was stronger than my forecast, but I said, let me wait for the revisions to see if I

07:30get it right. To me, it looked right last year after the revisions. Whatever everybody else thought

07:35is something else. People are saying, oh my God, they do these revisions. They've done revisions

07:39every year for decades, and the revisions have actually gotten better. But now we're looking at

07:45it and thinking, okay, so how are the jobs data is going to be reported? Because the President of the

07:50United States fired the head of the BLS because it was a bad report and thought that it was a conspiracy

07:59against him. So now he's got one of his own people in there. So we'll see how the jobs work. I don't

08:07know how he can keep his job if the report's bad. You know, you set a precedent when you start firing

08:15people for reporting the data. And in this case, it doesn't take much to beat the last three months.

08:24I mean, even if jobs were at 55,000, where other people would be going, that's very low jobs growth.

08:30The Federal Reserve has already told us that because population growth is slowing down, we should expect

08:35slow jobs out there. It's jobless claims that is the last and final kind of defense for the Federal

08:44Reserve's labor. And that the initial job with claims are still low, four-week moving average

08:48is still. Continuing claims being at a three-year high doesn't matter to the Fed. As Jerome Powell

08:53said, if you're looking for a job, tough. Hey, listen, it's hard out there. That was a couple months

08:59ago. He was like, yeah, it's tough out there. We don't care. My God, wage growth is still too high.

09:05You know, we have to make sure to attack the labor supply. Why? If you attack the labor supply,

09:11you can get wage growth down. And why do we always talk about this? Because this is the real nerdy

09:15aspect of Fed policy. The Federal Reserve does not believe in the productivity

09:19holy grail of AI or anything. I mean, AI in a sense is inflationary. You could see it in

09:27electricity pricing. But if you don't have the productivity gains, then you need wage growth at

09:333%. You have to suppress wage growth if you're the Federal Reserve. Under no circumstances can people

09:39make more wages because inflation will take off. So 3% wage growth, 1% productivity, 2% inflation.

09:46I don't make the rules. They do. So this is why we harp on this. Attack the labor supply. Attack,

09:52attack, attack. Wage growth being here. Now they'll say, well, rage growth right now is currently not

09:58inflationary. They were saying that. And while they were saying wage growth is too strong,

10:02we have to attack the labor supply. So it becomes this really good conflict about Japan is seeing

10:09wage growth finally because their population is dying. So they need more older workers to stay

10:18working. They just don't have enough people. So their wage growth is picking up. We're not in that

10:23category yet. We still have a lot of good replacement workers. But the question is now,

10:28what reports will make the Federal Reserve say, hey, listen, you might get the one rate cut,

10:35but nothing else is going to happen? Are we going to be just stuck here for the 10-year yield just

10:40being at this elevated levels? And really, the mortgage spreads has to be the story going out

10:45for 2025 and 2026. Or as we talked about in the last podcast, the White House is going to start

10:51saying, hey, listen, look at arm loans. Arm loans are sub 6%. We're going to cut rates. So there's

10:57this huge dynamics. But all I know is that the president of the United States fired the person

11:02who was doing the BLS because he thought there was a conspiracy against him. And he put in a guy that I

11:08am very questionable on running economics. And I don't know if he will be strong enough to tell

11:17President Trump, listen, the jobs report is here. So we need to test this, right? We have a theory,

11:24but we'll test this out. So this is the thing that confuses me, though. If Trump wants a better jobs

11:31report, that goes against lowering rates. So this is my question. It's like, where's the disconnect here?

11:36Because it's a whole separate problem if we can't trust the jobs numbers. But whether they're

11:42fudged because he has his own guy in there or whether they can come in better, that doesn't

11:47lead to lower mortgage rates. He can do it with short-term rates. This is why we talked about

11:53this. So explain that. We talked about this in the last podcast that what if the White House is

11:58thinking, hey, listen, the long end is not going to come with us. But if I get my own person,

12:02remember, his own person really isn't Christopher Waller. It'd be like getting Kevin Hassett or

12:08Kevin Walsh. And Trump gets what he wants. We're going to cut short-term rates down to the Fed

12:13funds policy to 1%. And we don't care what the long end does, because we're going to get armed

12:18loans out there for Americans. Because remember, it's the whole Trinity argument for the White House

12:24that we talked about since last year is that they want lower dollar, check, lower energy prices,

12:30check. They need lower mortgage rates. If they get that, you don't necessarily need it with the

12:3530-year if the short-term rates go down. So it's fascinating. I mean, this is really like government

12:41coming in and running the economy based on their own government models. This is not common. But it

12:49is interesting to see this dynamic that I think we don't ever think of it this way. But they might go

12:56against historical precedents to drive short-term rates down and believe that they can get that

13:01third and final check. Because you don't need really much. I mean, we're talking five and a

13:06half to 5.75. I think they would be perfectly comfortable with that. Now, if you don't get

13:11that on a 30-year yield, can you get that on the short-term side? So that's another dynamic out here.

13:17But it is, to your question, a lot of people say, well, Trump wants lower mortgage rates.

13:22Softer labor data could get you there. We wrote that article a few months ago. If Trump wants

13:30lower rates, he has to talk about the labor market getting softer. He can't do that,

13:34right? Because the economy has to be boobing or anything like this. And we go back to 2018

13:39and 19. The economy started to perform better once all the trade deals and all that went away.

13:45So you can make a case that the first half of 2025 was basically a subversion of what we saw,

13:53the trade war tap dance back then, where business investment went down to zero and companies didn't

14:00know what was going on. You get more clarity working from a low bar. You can make a case that

14:05the labor data picks up and consumption picks up. But it's one of these things that you have your own

14:12models for economic cycles. And it's just, it's never a good thing when you have the lowest three

14:17month job creation average, and then you have manufacturing jobs being lost, and then you

14:21have residential construction jobs being lost. And when we look at economic cycles, that's not what

14:25we call a solid marketplace. And you're basing everything on a low unemployment rate. But

14:31I don't know where you're, the Fed is really pushing that, pushing it here. But I understand

14:36what some people are saying. Trump got what he wanted, a weak labor report, and he comes out and said,

14:41it's fake. I'm going to fire the BLS person and get my own guy in there. So it's just, we'll see.

14:48We'll see. I just, I don't know if the gentleman could tell Trump, hey, listen, the jobs data is not

14:55good. So I hope he does. If the labor data is weaker, I hope he sticks to the rule. So we'll see.

15:04But there is a good case to make this. This is a very, very low bar now to be on the labor side. And

15:09how does the bond market and the Fed react? Okay. So one of the reasons that Trump has backed

15:13off of firing Powell, which he would love to do, is because you had such a strong market reaction to

15:18it. So now we know he's doing the end run and going, okay, I'll just pick off governors one by

15:23one. I'm also wondering like this, if the jobs data comes in and people feel like it's been fudged,

15:31do you have the same market reaction as when he wanted to fire, you know, Powell? Because it's

15:37like, you know, you're, you're messing with stuff. Now we can't trust it. Like, no, I don't, I don't

15:42think the market reacts to a hypothetical theory because bond traders are here to make money. And we

15:48always say like, why aren't there any bond vigilantes? Like people always talk about bond

15:53vigilantes. They're going to, they're going to, they're going to show the, the, the government that,

15:57you know, you can't keep on spending money. Where are they? Where the hell are they? It's been

16:02decades and decades. Why? Because bond traders are here to make money. And if you think the 10 year

16:08yield is going lower or whatever, and you don't do it, you will get fired. Your wife will get really

16:13mad at you. And you can't tell her that, by the way, this is, this is an ideological principle that

16:18I think we should be selling the 10 year. Nobody cares. Right? So we, we always like to do these

16:22hypothetical theories that the mark, well, would it be really shocking if jobs came in at 150,000

16:28and we revise them, you know, to some people, yes. To other people say, Hey, listen, we, we,

16:33there was a lot of market distortion. We had Godzilla tariffs. Nobody knew what was going on.

16:37So now that's somewhat, you know, going away, maybe, you know, companies will feel better.

16:43It's just that the jobless claims data has been the golden egg for us for, and it's still not showing a

16:51labor market breaking. Uh, so I don't think, I think we, we, we, we always like to emphasize

16:57the market. Well, the, the market has just crushed. I mean, absolutely Hulk smashed the

17:03people that said the 10 year yield should go at 6%. The government is broke. Nobody trusts

17:07the data. Inflation is, I mean, you're like Hulk, like two big hands are just, Oh, just destroying

17:13that. And the 10 year yield is here. And the 10 year yield and mortgage rates being here look

17:18normal to a market function. So, so we'll see, we'll see how this goes, but it's really

17:24fascinating that we're at this stage, uh, uh, of the economic cycle. And, uh, again, under

17:32no circumstances, we want a forever economic expansion. Recessions do happen from time to

17:37time. And, uh, you know, the jobless claims data has always been my line in the sand since

17:422022. It is still held up. Um, but it becomes a little bit more interesting going out the rest

17:48of the year because of all the other data lines that we put into the system that show a labor

17:54market getting softer, not breaking it, but softer, but where's fed policy. It's not a neutral. We're

17:59not even talking about a common sense yet. My God, if the labor market was breaking, does the fed go

18:04into a common sense? Yes, they would normally, but man, it's, it's, it's not normal, but it's a lot

18:11of fun if you're an economic nerd, because there's a lot of things going on in 2025 that we're just

18:16not accustomed to in the last 20, 30 years. Bill Pulte sent another recommendation to Pam

18:20Bondi at the DOJ to, um, look, you know, consider investigating, bring charges against a third

18:27property that potentially has problems that Lisa Cook owned. So I, I hesitate to even ask you about

18:34this because it's Friday and this is coming out on Tuesday, but quick thoughts at anything could

18:39happen between now. Um, I mean, this might happen before this podcast even comes out, but I do, I do

18:47not believe fed governor Lisa Cook is going to be part of the federal reserve anymore, you know, because

18:53you know, in, in 2020, there was a lot of investigation into federal reserve members, you know, for

19:00investing and trading and stuff that they broke. And there was a lot of, you know, uh, backlash on the

19:07lack of, you know, uh, governing around the federal reserve. So whatever anybody thinks the game is

19:15changed with president Trump and Pulte in house. So if the federal reserve does their own investigation

19:22and they say, yes, this is true. So what their choices would actually, you know, uh, uh, would be

19:29perfectly fine for Trump and, uh, Pulte. So that's what the game plan was. They wanted the federal

19:36reserve to have this information and make their own decision out there. And I think there is some

19:41interpretation about, you know, um, listen, if this is a legit thing, you know, we, we, we have to govern

19:49our own people. Uh, I, I, I don't see how she stays. Uh, they, they, they would have to, I mean,

19:57unless, unless her lawyers tell her, because they said it was a clerical error. I, I, in this environment,

20:04you can't have clerical errors out there, whether you agree with this or not. It just, it's hard for

20:10me to see her staying at this point, uh, uh, out there. So, and, and, and I always say that, uh,

20:16Colger, she resigned early. What was the story on her, you know, you know, so this is, this is New

20:23York bully ball, right? We said this from months ago that they will go after fed governors now

20:30because it's a chess game, right? You take this person, I'll take this person and put my person

20:34and put my side. I've got more votes versus you. This is a civil war right now between the United

20:40States government and the federal reserve. And Trump is getting his people in there. This is how it

20:45operates, whether any of us agree or disagree with this. It's really tough in this environment to

20:50see her staying, uh, unless they can 100% with no equivocation whatsoever say that, Hey, this is

20:58all, none of this was fraud and anything because this is never going to leave. And I say this because

21:04Lisa cook is probably one of the more dovish fed members who is actually talking about the productivity

21:10gains in AI and that that's not going to be inflationary. They don't care. They didn't want their

21:14old people in there out there. And, uh, man, as we've seen. Yeah. So I, you know, a couple of

21:22things to note, you know, I think Powell's job got even harder or worse this week, which is hard to

21:28see because I think she waited a couple of days to see, is he going to, is he going to stick up for

21:32her? He didn't. So she named him as one of the defendants in her suit, uh, against Trump, uh, the

21:39federal reserve board of governors and, and Powell at the same time, he's getting pressure. We just saw a,

21:44uh, a tweet or a, uh, a social post from Pulte saying, you know, um, the fact that, uh, Powell

21:51is letting her, you know, staying in her office and still has access to her computer and all that

21:55stuff. So he is getting squeezed on both sides even more. Like I, I do not envy, uh, Jerome Powell,

22:01whatever you think of him. Like, uh, he has a very difficult job.

22:05Um, and, uh, we brought this up was November, December of last year. Get ready. If you guys

22:11look at all the headlines that we have written, all the podcasts, this is going to be a war.

22:15This is going to be war that not a lot of people have, have ever been accustomed to. Uh, but this

22:21is how president Trump's operates. It's bully ball. And, uh, there is no relenting out here. And this

22:27was set in October of 2024, right? The game plan, the shadow fed president, the going after governors,

22:35there were there, this is a methodical process that has been in place for some time. And I would

22:41have to say, uh, in this, in this sense, Trump is winning, uh, because he's starting to get more

22:47people on his side. And if they get elected, see, this is why I really think I'm really hoping that

22:53it's Christopher Waller to be the head chairman, because he's not going to have emergency rate

22:58cuts down to 1%. But what if Kevin Hassett is the next fed? What if Malpass, what if Kevin Warsh,

23:05you know, we, we, we, we get into this whole new ball game with us economics. That's could be much

23:11different, but, uh, uh, interesting times, Sarah Wheeler. We said the second half of 2025 is going to be

23:17lit and we still got a few more months left for the rest of this year. And the chart daddy's 50.

23:23Now it's just going to be a lot more fun. Okay. You're half a century. I know. Have you,

23:29have you considered you're now half a century century and I feel great, man. It's almost not

23:35fair. No, no country has a, no country has a Dorian gray labor market. We all eventually age and die,

23:41but man, with modern day food and technology and health and everything, boy, 50. Now, uh, in 2025

23:48looks a lot different than 1775. Well, we need you around for another half century.

23:54I'm going to be for, I always tell the American bears, I'm going to outlast all of you.

23:58I've seen some of you guys, you know, you're not lasting another 50 years. Okay. So, uh,

24:02we will do this. And when I pass away in the afterlife, my brother or sister after me will do

24:07it. And this, this constant battle versus, you know, the American bears and the American goals

24:11as all American bears have failed since 1790 for a reason. 1790. Okay. Logan,

24:17thank you so much for being on. Um, enjoy your birthday and we will talk soon.

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