- 5 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the job data coming in this week and how it’s affecting mortgage rates.
Related to this episode:
Mortgage rates hit a new 2025 low after soft job openings report
https://www.housingwire.com/articles/mortgage-rates-hit-a-new-2025-low-after-soft-job-opening-report/
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 HousingWi
Related to this episode:
Mortgage rates hit a new 2025 low after soft job openings report
https://www.housingwire.com/articles/mortgage-rates-hit-a-new-2025-low-after-soft-job-opening-report/
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 HousingWi
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the
00:11jobs data this week and what's happening to mortgage rates as that comes in. Logan,
00:15welcome back to the podcast. It is wonderful to be here. By the time this podcast comes out,
00:22jobless claims will be out. The ADP report came out, but labor overinflation, new year-to-date
00:29mortgage rate lows after the job openings report. The job openings report. So that missed estimates,
00:36not by a lot, but tell us what happened there. So the job openings report is a controversial
00:42report. A lot of people hate it because they think it's fake. They don't think there's that
00:47many job openings, but the Federal Reserve loves it and I love it because it's like the purchase
00:51application data. It's basically a trend survey. So it does tell you if the labor market is hot
00:57or getting colder. Well, today for the first time since 2021, we have more unemployed workers
01:04than job openings. And that's critical because the Federal Reserve really put their hat on that
01:10data line for so many years. For those that remember the COVID-19 recovery model, the labor
01:17recovery had job openings getting up to 10 million in that. And we were talking about that in 2021.
01:25It got up to 12 million. Well, it's back down to 7.2 million. We're kind of back to the pre-COVID
01:30era, but the data line that the Federal Reserve loved to hold their hat on is basically we have
01:36more unemployed workers than job openings. Manufacturing jobs are slowly being lost for
01:43some time. Residential construction jobs are slowly being lost. The Federal Reserve now are coming out and
01:48saying, well, you know, if we just get 30 to 50,000 jobs, it'd be okay. You know, so this isn't the
01:55solid labor market that they're talking about for so many years. And I think it's just hard for some
02:01of them just to make that next stage because jobless claims are still low and the unemployment rate is
02:07still low. So a very fascinating week, especially for us that are labor over inflation. It does explain
02:14why mortgage rates are at year-to-date lows. Of course, mortgage spreads are the key beneficial
02:21variable in that equation. So the year-to-date low so far is 6.49%, correct?
02:28Yes. And that just happened this morning. The 10-year yield last time I checked was at 421. It has been
02:34very difficult for the 10-year yield to close below 4.18% and then head that next stage lower. Of course,
02:43you know, the Fed raised their inflation expectations this year and they've been correct, right? They've
02:50had 3% inflation, you know, CPI core is at 3.1%, PCE is at 2.9%. But the labor data is overriding
03:00inflation. If only one person talked about that. Who could that be? Who could that be?
03:07In any case, it becomes a little bit more fascinating Jobs Friday for the payroll report
03:15because I've been saying that, listen, it doesn't take much to like beat expectations. I'm not talking
03:22about the expectations of the report, but just, you know, I mean, how much worse can it get from
03:2835,000 jobs on a three-month average? You know, so it just makes it more interesting. But like
03:35everything else, Sarah, after July 1st, 2025, we said the second half, it's going to be lit. And
03:42that's what it's been here all along.
03:45It has. Okay. So let's talk about job openings because they climbed after COVID, right? Obviously,
03:51lots of people were out of work. I mean, they were just like, so tell us where we came from,
03:58where we are today and what you make of that. Okay. So job openings is very critical to my work,
04:04especially in the last decade. I remember like in 2016, writing about job openings are going to hit
04:096.21 million just because, you know, the baby boomers are leaving the workforce, right? They
04:15need to be replaced. If they're replaced, it's basically a wash. So job openings, of course,
04:20back then in the last decade, the anti-central bank movement was like, there's 96 million people
04:25out of work. We had some really crazy people in the last decade as well. And so not a lot of people
04:32took that job openings data seriously, but it ended up being the longest economic and job expansion
04:38in the history of America because none of the labor triggers ever went off. Not even the sixth
04:44recession red flag was even triggered even for a very brief time. But in COVID, because, you know,
04:53you have people dying, you have the COVID-19 variable of a health scare. We had all the jobs being lost
05:04to COVID. We thought it would be September of 2022, just because the vaccines and everything and,
05:10you know, get everything. We should get all that jobs back. But we thought job openings from 7 million,
05:14you know, of course, it crashed when COVID, but then recovered. We could get to 10 million. It got
05:20to 12 million. We're now down to 7. 7 is pre-COVID level, 7.2 million. So we're basically there. But I
05:28always say that, you know, when we write that in the article, the Federal Reserve does not like wage growth
05:33above 3%. Because if you people make more money, do you know, Sarah, what will you do if you make
05:37more money? You'll buy a house and start a family. Yeah. Yes. You'll buy stuff. And if you buy stuff,
05:44you know, like Neil Koshkar said, how are we supposed to balance an economy if people have 6%
05:50mortgage rates and they buy homes and they have sex and they go to Ikea and they buy stuff?
05:54How are we supposed to do that? So wage growth at 3%, 1% productivity, 2% inflation.
06:03I don't make the rules, but that's what they're going with. Right. And so the attacking of the
06:08labor supply, like to me, I always say the Fed smiles because, you know, you know, you cannot
06:13allow people to have strong wage growth because that'll be inflationary. They always say wages
06:18aren't inflationary right now, but really you could go back in thousands of statements, attack the labor
06:23supply. Wage growth is too strong. Wage growth is too strong. So you want to keep an eye on the wage
06:28growth data because a lot of people say, well, if population growth is really slowing down and there's
06:33not a lot of people looking for work, then obviously the people that you want to keep, you can, you have
06:39to pay them higher wages. Now with inflation picking up the cost of living goes up. So that's, that's the
06:44wage growth variable in there. So a fascinating time for the labor data, but this one was probably one of
06:52those ones where the feds like, you know, we, we have to maybe change our tune just a little bit, but you,
06:59you definitely have a divide within the federal reserve about those who say 30,000 to 50,000 jobs is
07:05perfectly fine. If we only create 30 to 50,000 jobs for the next a hundred years, we're perfectly okay. But in
07:12this, in this case, there's other people that says, well, manufacturing jobs are being lost, residential, there are
07:19sectors of our economy that are actually shedding jobs already and policy is too tight for this. So
07:23the conflict, the fight, the civil war between this group and that group on the federal reserve and
07:30Trump's attempt to take over the federal reserve board and push down, you know, one of our listeners
07:37caught on to what I'm saying. If it's very hard for the 10 year yield to get below 4.18%, but if they
07:44cut the fed funds rate three more times, that five year, seven year arm looks a lot good. People don't
07:48want to wait. And you got sub 6% mortgage rates. And you know, these arms aren't the arms of the
07:55past. You've got to qualify for the recast. Well, you know, people are starting to pull the trigger
07:59on this. And this is why we highlight that, you know, Trump's policy might be for, for arm lending
08:04growth, uh, than the 30 year fix. So a lot's going on, uh, um, but jobs Friday is coming up. And again,
08:11it's just been very hard to break under 4.18. Well, so we'll see if that happens, uh, this Friday.
08:16Okay. So I want to dig into something that you said about, um, some of the fed comments, like,
08:21so obviously 35,000 jobs, the fact that, that we had that revised jobs report that said for the
08:28last three months, only 35,000 jobs a month had been created. And then today we got somebody from
08:34the fed talking about, Oh, you know, if it was 30,000, that would be okay. What is that?
08:39Yeah. Fed Musa has, yeah. Some of the fed presidents are giving their, their run rate, which means,
08:44you know, what's the, what the population growth, where it is, where they think it's acceptable for
08:48job growth, just to, you know, uh, the, the replacement rate. So some people have 50 to 75,000,
08:55uh, fed governor Musa had a 30 to 80. So that's a kind of a little bit of wide range, but the fact
09:00that he said 30,000, that 30,000 jobs a month for the rest of the history of the United States would
09:06be perfectly acceptable with population growth. It's like, so again, I, I, I, what do we always say
09:12since 2022, the federal reserve needs the labor market to break, right. You know, to get, you
09:18know, to get dovish again, like, you know, all we're talking about is getting to neutral policy,
09:24like neutral policy. We're not even talking about, so we have this huge fight any other time in
09:30history with these jobs numbers, with manufacturing jobs being lost, you know, the, you would have a
09:35different take, but I, I just think this, this group of federal reserve struggles with this,
09:40you know, uh, because of the inflation, inflation took off, which is pandemic inflation, right.
09:45They shouldn't hold that. It's pandemic inflation and the disinflation happened, right. It wasn't
09:49because of them, you know, that's just the function of, uh, uh, pandemic inflation moments now.
09:57Now what, right. I mean, jobless claims is the last line of defense. You know, if jobless claims
10:02start to take off, it doesn't really matter. The bond market goes lower and the fed plays catch up.
10:06So, so it is, it is going to be critical to watch these last final labor triggers. If they start to
10:11pull, pull on the federal reserve anytime soon. Okay. So what is your, what do you think that,
10:17um, the, uh, that number should be instead of 35,000, what should that be? I have a run rate
10:25at 78,000. Okay. And again, a lot of people just aren't sure what the population data is because,
10:31you know, tracking stuff lately hasn't been excellent, but, uh, uh, uh, see the thing is
10:36that if you're, if I'm saying seven, 8,000, that's not a solid labor market, that's an excuse,
10:42right. You know, so a few months ago I said, you know what the jobs data is underperforming my
10:48estimates this year. This is before all this happened. And I said, this is the first time
10:52in this recovery that the jobs data was underperforming last year. The jobs data was
10:57outperforming my estimates, but the revisions, everything back came down to the level that I
11:01thought we should grow this year. Wasn't even the case. And then it's not coincidence that we're
11:07having this discussion as manufacturing jobs are being lost and residential construction job.
11:13If it wasn't for AI data centers, you'd have even less construction workers in total, right? But the AI
11:19data centers are, are, are, are, you know, since chat GBT was created, the spending in data centers have
11:25just taken up. So every cycle is unique. This is no different. Uh, this has different variables
11:31that we're accustomed to, but, uh, um, we'll see. I mean, again, uh, until that four 18 level breaks,
11:37uh, um, I'm, I'm skeptical of rates going, uh, much lower, but, uh, clearly this federal reserve
11:46needs more labor damage. They, if they're accepting 30 to 50,000 as okay, it's fine. Then, you know,
11:54there needs to be a broader discussion on this, uh, going out in the future.
11:59Okay. So, you know, what do you think the best case scenario for rates are on Friday? If we get
12:06not a great report, what do you think the best case scenario is?
12:09I always say the best case for, for mortgage rates are jobless claims data. Jobless claims
12:14data is, is literally, there's no hiding behind any number with jobless claims. If that thing starts
12:21heading toward 323,000, the 10 year yield does all of itself. So when this report comes out or when
12:27this podcast comes out, we'll get the jobless claims data. But however, also, um, uh, you,
12:33you know, it's such a low bar to beat. I mean, we, these jobs reports, you know, you could have like,
12:38we could have 125,000 jobs created on Friday and that would be, that look amazing compared to the last,
12:44but that it would, that it would still technically be under my estimates for this year. So it's one of
12:50these toss-ups that what, what, who knows what's how the bond market's going to react because we
12:56just had the three months of the lowest job growth in the 21st century without a, uh, a negative report.
13:02We already have manufacturing jobs. We lost. We already have residential construction. So the,
13:07you can't go any lower than this, then, you know, kind of, uh, recessionary data. So the labor
13:14market's not breaking, but it's very soft in terms of hiring. So the question is, you know,
13:20what, what's next? Uh, cause all we're talking about is the Fed getting to neutral policy,
13:25maybe in 2026 or 2027. Uh, Christopher Waller had a few statements out today and he says,
13:30my neutral rate is much lower than other persons. The civil war is real, right? The civil war is real.
13:37The one within the Fed is trying to get as many of his people into the federal reserve to override
13:42Powell. Not only that, but override the Beth hammocks of the world, Mooses of the world,
13:47all these other fed governors, uh, uh, and the conflict is going to be here. And just imagine
13:53when Trump's people are in the federal reserve, how chaotic those minutes and stuff are going to be.
13:59Okay. Well, you know, when I was asking, you know, what's your best case scenario, what it,
14:03let's talk rates. Okay. So say, you know, what do you think is going to happen with rates? How low
14:08can they go? I cannot get rates much lower until I can see evidence that we can break below 418
14:15on the 10 year yield. I mean, it's just right now the, the, the 2025 range was 5.75 to seven and a
14:22quarter, right? We believe in ranges and waves and models and 10 year yields and spreads and
14:27the spreads are good this year. So right now we're already a little bit more than halfway through the
14:32low point of the year. So to, to me, you just need real weaker data to warrant the 10 year yield
14:38breaking below 418 and heading lower, because now that's going a little bit ahead of fed policy
14:44right now. See last year, 10 year yield was at three 60. If we had three 60 and mortgage spreads
14:52this year, we're sub 6% mortgage rates today. You know, if that was the case, but that's not the case,
14:58even though the jobs data is softer, inflation expectations rose this year. So this, this is
15:05kind of the tug of war line right now. So you, you really need a weaker report to get rates much
15:13lower than here, because the fed is staying very firm about inflation and there's not enough voters
15:20right now on the board to override Powell's and the other fed governors who don't want to cut rates.
15:26There's, there's a lot of fed governors who do not want to cut rates and they're, they're saying it,
15:31screaming on it on their, on their speeches and talking points. So we'll see. It's a, it's a much
15:37more efficient pricing this year on the 10 year yield than last year, last year, everyone kind of
15:42freaked out and everyone thought we're 100% we're going into recession, but that wasn't the case.
15:47Clearly. I mean, if we're going to, if we're going to plateau at a mortgage rate, 6.49 is way better
15:54than it has been at some points, but obviously we'd love to see it go closer down to 6%.
15:59So what we've seen always in the data, because purchase application data came out,
16:05housing data tends to perform better when rates get below 6.64. And now that we have five weeks of
16:10data, we do the weeklies. We have four positive weeks, one negative week. We have five straight weeks
16:16of year over year growth that are both double digits, right? 17% today, 25% last week, you know?
16:22So the longer it stays below 6.64 heads out, the better the housing data has looked in the past.
16:28This is after 2022. We're not talking anything before that because rates never got below 6% in
16:34the last decade or never were above 6% in the last decade. So that's all we could work with. So we'll see
16:40again, this is one of these things where, uh, uh, it really is a battle of the tests of the wills of
16:47the Fed, you know? Uh, but if jobless claims start to head up higher, nothing matters. Bond markets will
16:53head like they did last year, last year, people, even though the jobless claims data wasn't really
16:57breaking, the 10 year yield was so ahead of Fed policy that any kind of stabilization into data shot
17:04rate backs up as they should have. Uh, uh, but this year we don't have that, you know, 360,
17:09370, 10 year yield. We really have a hard time breaking under 14. The only time we did it was
17:14Godzilla tariffs and Godzilla tariffs were just, we had a bear market in stocks and people were
17:19talking, all hell broke loose. You want to discount that from the data lines because, uh, uh, that isn't
17:25here. We'll be keeping a very close eye. Um, you wrote a story today about the, the new low mortgage
17:32rate for the year. Everyone keep an eye out there and also, uh, listening. Cause that's what we're
17:37talking about this week. Yep. Jobs Friday is coming up. We always love jobs week. And this is
17:42the last jobs week before the Fed meeting. So all these data is going to, uh, really stick for them.
17:49All right, Logan, thank you so much for being on. Pleasure.
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