- 2 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about jobs week and how that data is affecting mortgage rates.
Related to this episode:
Compare Current Mortgage Rates - HousingWire
https://www.housingwire.com/mortgage-rates/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
Related to this episode:
Compare Current Mortgage Rates - HousingWire
https://www.housingwire.com/mortgage-rates/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
Category
🗞
NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about Jobs Week and how
00:11that data is affecting mortgage rates. Before we get started, I want to thank our sponsor,
00:16Trust & Will, for making this episode possible. Logan, welcome back to the podcast.
00:21It is wonderful to be here. I'm in Salt Lake City in about a few hours after this podcast comes out.
00:27Mitt Romney and I will be on stage, you know, talking about housing. So I finally have some
00:31hair competition, you know, and we'll see who wins that one. I am also in Salt Lake City,
00:38same event. I'm going to be on that stage with you and Mitt Romney. Cannot wait for that discussion.
00:43It's going to be great. And I agree, like the whole Romney family, you have some hair competition
00:46in this family. Yeah, we'll talk about the chart daddy doctrine and the other doctrines.
00:50We are not. No, not with Mitt Romney. Okay, let's dive into today because we had some jobs
00:56reports today. What did those things do to mortgage rates? What do you think?
01:00You know, it was a very interesting day in the reaction to the jobs report. We had the ADP report
01:06and the ADP report usually isn't the most valuable, but, you know, because it's gone weekly and this is
01:12the monthly report, it came down, you know, as a slight miss, still positive. Bond yields ticked down
01:19just a little bit. But then the job openings data came out and the job openings data is the Fed's
01:24kind of favorite, you know, outside of the BLS report. And it was a huge miss on the job openings.
01:32The headline was estimated about 7.6. It came in at 7.4. But the internals had a different story.
01:43And because the internals were a little bit different, bond yields just ticked up a little bit.
01:46Now, because the mortgage spreads are almost back to normal and volatility has compresses,
01:51not much is happening with rates. But it is an interesting theory to think about going out in
01:56the future. The jobs hirings, and this is what confuses people, the jobs hirings now,
02:03the higher rate is as low as it was during COVID and as low as the low levels of where we saw in the
02:10great financial recession. So when people see that chart, they go, oh, my God, the labor market's
02:15completely. However, the Federal Reserve likes to quits rate, you know, people quitting their jobs to go
02:24to higher paying jobs and the discharge data or the firing data. And both those things were a little
02:31bit better this month. So at first, a lot of people were confused. Why is bond yields going up a little
02:37bit? You know, there's, you know, isn't this a bad report? The Fed likes to read the internals. And if
02:43they are completely fine with 21st century lows of job growth in 2025, where they are now with Fed
02:52policy, not that far away from cutting enough to get to neutral, boy, the labor market better be showing
02:58some deterioration to get them to that next stage. And I think that this was a good example for everyone
03:05going out for the rest of this year that unless, well, eventually there'll be a change at the Fed
03:12chairman, but you're probably going to see a lot of other Fed governors put up a fight
03:16on this labor data if it's not breaking. So this is the really tricky thing about the jobs data. You
03:22have the headline, then you have the internals. And people are like, you know, why with that headline
03:27is that? So I'm so glad that you went into that and said, you know, this is what the Fed is looking at
03:32there. From your perspective, is that a valid thing to be looking at? I mean, do you feel like,
03:36yeah, that's a valid point on quits? You know, I mean, we go back to 2022. And in 2022, it's,
03:44you know, the Federal Reserve is not going to pivot like people want to get, you know, sound dovish or
03:51take the next stage of rates until the labor market breaks. And they're basically running this all the
03:59way into 2026. So, you know, this is why I've highlighted jobless claims more than anything
04:08else. And even with the lowest job growth in the 21st century, they have repeatedly said, well,
04:15we look at initial claims and it's not laying off. Well, the job openings data's discharge rate ticked
04:21down a little bit. So it's kind of a very low hiring, low firing kind of cycle. I know a lot of people
04:28see these headlines about, well, this company is laying off X and this company is laying off Y
04:34amount of people. But again, normally like one and a half to 2 million people lose their jobs each
04:39month, right? So the firing rate is not big enough to offset what, you know, what is left in terms of
04:47hirings. And this is why these jobs reports are very low hires. We have a few reports that are
04:52negative. And this is with federal workers getting fired as well. So it's tricky. I get it. I get it.
04:59Like people saw that higher. They're like, why, why aren't millions of jobs being lost? When the economy
05:05goes into a recession, economic growth slows down, investment slows down, industrial production, wages
05:10fall, consumption comes down. We're not quite there to have these mass firings that people are looking
05:17for. And the Fed is like the main point we always say, they are going to stay as restrictive as
05:23possible, right? They're not as restrictive as they were in 2023, but they're just not at neutral yet.
05:29The market is pricing a lot of neutral policy. So I get it. I get why people were confused this
05:35morning. But if you think about it, that labor needs to break for them. And I think Beth Hammock,
05:41who's really one of the more hawkish people, when she said, if jobs are being lost, we'll play catch up.
05:48When she made that statement, I don't think people gave it the value it did. Playing catch up means you
05:54have pawns that you sacrifice first, and then you come in after the fact. With the growth rate of
06:01inflation still above target, this is the way they operate. Now, all of this can change this year with
06:08a new Fed chairman and a few Fed governors being fired. So with everything that's going on around
06:14the world now, that is not that, you know, crazy to think about this year. So variables can change
06:21throughout this year. That's why we made part of the forecast is X variable, you know, things that
06:27we just we don't have. We don't have it yet, but we know it's coming. But yeah, this is where we're
06:34still heading toward neutral policy. And this is kind of why the hoarder line was created at 380
06:39on the 10 year yield. Like, you know, that should hold unless, you know, labor market breaks or the
06:44Fed gets dovish. And it held, right? It held all of 2025. And we're in 2026. And even with some
06:52perceived weak data, we're I think 415 is the last time I saw. So one of the reasons that the Fed has
06:57said that they're okay with this very low level of jobs being created is because they feel like,
07:03or with where unemployment is, is they're like, there are less people here, right? So there's less
07:08people in the labor force. Therefore, we're going to see less of these things. What is your take there?
07:13You know, Fed president Barkin came out yesterday and said, you know, I imagine in, you know, I think,
07:20I'm not exactly sure the timeframe, but like five to 10 years from now, we're not going to have enough
07:25people working, right? You know, we just don't have enough labor force growth. As the baby boomers
07:31age out, retire, and eventually die, we don't have enough replacement workers if immigration isn't
07:39there. And then when that happens, growth, you know, eventually gets impacted because, you know,
07:45you just don't have not only the demand, but people, the labor force growth. So either productivity
07:51really takes off in a miracle way, right? This is the AI productivity miracle that people talk about.
07:57But yeah, I mean, I mean, even in 2024, my forecast for job growth was a lot lower than everyone else
08:04because I adjusted to population and it kind of hit that level right on cue. But this is different.
08:10This is not just population growth. Okay. This is demand. Of course, housing starts and permits are at
08:17recession levels. That's never a good sign for an expanding economy. However, as rates went down
08:23lower to 6%, just like in 2023, residential construction workers came back. So there's a lot
08:31there. Like, if you don't track this stuff, I totally get why people are confused. But they really,
08:38you know, if inflation was running at 2% for like 12 months, I think they would have a different take.
08:44But this Fed is, you know, even though nobody's ever really forecasted breakaway inflation,
08:51I think the people that thought this was going to be like COVID, it's tariffs are a one-time
08:57price adjustment. They don't really have the ability to like take inflation. And just remember,
09:03since 1996, the only inflation spike we had was a global pandemic. We had zero interest rate
09:10policy. QE1, QE2, QE3, operation twist, deficit spendings, you know, could it get inflation,
09:18you know, to stay above 2% in the last decade? And with a growth rate of inflation falling before
09:23tariffs head, there it is again, right? So we have a, I think the Fed would be comfortable saying
09:28inflation is really running at 2.4 to 2.5 without tariffs. And that's kind of where we're at. We're in
09:36this slug fight for this last few rate cuts. But if labor broke, it's different. That's a whole
09:42different ballgame after that, because everything they've held their hats on to is really jobless
09:47claims, stay in attack. And it has throughout this last few years.
09:52So a couple of days ago, it was the first time you and I talked after the invasion, military action.
09:57I don't know what you want to call it in Venezuela. Different people call it different things.
10:01The military action in Venezuela and then, and since then, and you talked that time about how,
10:08what could happen there with oil and inflation. Can you give us an update, you know, a couple
10:12days farther than that, some other things going on? Do you feel like there's, it's going to help
10:18inflation one way or the other? Or what do you see right now? Oil prices to me look like they're
10:25kind of bottoming out. I mean, I could, I guarantee you the oil companies don't like to see oil
10:30under $60, you know? So because of that, you know, you are, everybody's here to make money,
10:37right? So operation costs and what does it get to extract oil, to refine it and sell it. And you,
10:43you know, so our rigs are very high producing, you know, so it's not one of these things where
10:49if some people thought, well, now Venezuela's here, oil prices are going to go even lower.
10:55It takes time for something like that to work itself out. I know a lot of people said, well,
11:00this is a shot against Canada, you know, but does Canada provide oil that Venezuela can? Is
11:05Venezuela oil even good, you know, in some cases, but nothing in the short term, but it's not an
11:13inflationary event war, right? If you look at the history of, you know, I, sometimes I put up my
11:191870 to 2026 inflation charts. If you look at the history of inflation, World War I, World War II,
11:27right? And of course, World War I had the pandemic in it. We had the labor force growth and oil shock
11:34of the 1970s. That was different. Home prices really were very hot from 1974 to 1979. I always tell
11:42people, home prices actually rose faster from 1977 to 1979 with mortgage rates going from 8% to 13%
11:49than from 2020 to 2022 with sub 4% mortgage rates. And then people, people refuse to believe that.
11:55Then you look and you show them the day and they're like, what is going on here? But, you know,
12:01it's hard to get like inflation spikes, right? Unless your currency is being completely destroyed or you
12:08have a shortage of goods or your economy's booming. Like, you know, the seventies had labor
12:13force growth, unbelievable. And, uh, back then, but we also had an oil shock and we ran that. I think
12:18we, we, we did a podcast on this two years ago about what would it take to get like double digit
12:23inflation? We had to run all these crazy variables. And it's like, that's not here. So, uh, any more oil
12:29production is a positive, uh, but there's probably limits to how much lower oil prices can go.
12:34There's a very bearish sentiment on, on oil. That typically means that you're closer to the bottom
12:40than, than, uh, than another big wave lower. And your X factor in your 2026 forecast, the housing
12:47worry 2026 forecast, you talked about the X factor is, um, Trump policy, Trump administration policies
12:53on housing. And then, you know, just Trump actions. And you're like, listen, so far in this first year,
12:59there's been muted. We had Godzilla tariffs affected, uh, markets, but outside of that,
13:04we haven't seen, uh, markets where the stock market bond market really re react to a lot of
13:10things. Is that the case right now? Yeah. You know what? And, and, and I'll tell people this,
13:15you know, if you go back 125 years with the stock market, if you charted the stock market and corporate
13:21profits, they're just moved together, right? You know, sometimes you can get a little weird variation
13:26where it's higher and lower from the trends, but corporate profits are good, you know, and that's why
13:32the stock market is up here. And the fed fed, if I believe 65 to 75% of where the 10 year yield
13:38and mortgage rates is fed policy, there you go. That I can explain the 10 year yield at four or 15
13:45today. Uh, um, and then there's a lot of noise, right? This year is going to be very interesting,
13:51not because we're going to get like a, uh, a white house housing emergency plan and everything,
13:56but it becomes really interesting if they choose Kevin Hassett or Kevin Warsh and then they go after
14:03governors. See, having a fed chairman is one thing, whatever. I mean, you're, you're, you're not
14:08going to get a hawkish Kevin Hassett or Warsh statement, you know, after the meetings anymore.
14:14So that, that, that's going to be over with, but you have fed governors who are probably going to
14:19fight against, you know, aggressive rate cuts. So, but if they somehow got those governors gone,
14:26man, that's, that's a whole different book. I mean, that's, we don't, we don't, we don't have
14:30anything like that to deal with, uh, in recent history and people go, well, Argentina did this
14:36and everything. This is the United States of America, man. Don't compare us to like third
14:39world countries. You know, we're not going to get like completely thrashed in the bond market or
14:43anything like that. Uh, uh, if that attempt is actually happening, but realistically, we don't
14:50really know how that's going to work itself out. That's why it's an X factor. Like we, we, we hear it,
14:55we know something's coming, but we need to see the execution. And after the execution,
14:59we see how the market reacts to it. So thankful that you're watching this and you're keeping us
15:04up to date, especially this week with jobs data. Logan, we will talk again soon, but thank you again.
15:09Pleasure.
Be the first to comment