Jobs data preview and mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs data and how it could affect 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   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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the jobs data and

00:15how that could affect mortgage rates. Before we dive in, I want to thank our sponsor, Trust in

00:19Will, for making this episode possible. Logan, welcome back to the podcast. It is wonderful to

00:25be here. By the way, I just want to give a special thank you to JPMorgan Chase for getting me a Houston,

00:32Texas Chart Daddy t-shirt uniform and having Chart Daddy name in the back. And actually,

00:39I think the first jersey I ever had as a kid playing sports, the number was 26 too. So

00:44very fortuitous with that number too. That was awesome. Yeah, Houston Texans coming through there

00:51and then like this year, it's going to be great. Okay, so this this week, we now have the

00:57government back online, right or should and so jobs week, does that mean we will get jobs data this

01:03week? Or is that still now put? I don't know exactly what when the dates we're going to get

01:08all the job openings in the BLS. But now that the government's going to be funding, you know,

01:13we could prep for that. Kind of before we get into jobs, purchase application data finally got the

01:21snow effect into it. It was down 14% week over week, only up 4%. This is what kind of snow or,

01:32you know, natural disaster stuff does to weekly data. And I always like to like remind people when

01:39jobless claims, which is a very key weekly data, whenever there's like a hurricane or something

01:43like that, jobless claims tends to spike, you know, it takes about two weeks, and then it comes

01:48back down. So with purchase application data, when you have so many people snowed in and not doing

01:53anything, it's going to have a decline. And then once you get the weather back up, you get the rebound,

01:59you kind of ignore that noise. And then we'll get back to trend eventually.

02:04It's interesting, because we, you know, we wrote the tracker, you wrote the tracker over the

02:07weekend, and we didn't see that effect yet. So it took a little bit because I mean, the tracker is

02:12is weekly data, the tracker and the purchase out the purchase application data is taken the previous

02:17week, our trackers, these pending contracts. So it has to get hit this week, or I mean, I would be

02:22shocked if it doesn't because whether the weather thing this size has to impact data, because if people

02:30are locked into their homes, and nobody's doing anything, you lose that variable that

02:37consumer variable in there. So but again, it looks it looks normal to me now out there. But

02:44trend is still the same. This year is starting the year better than any year we've had. And there's

02:51multiple things that are positive this year. Inventory growth is up, you know, affordability

02:57got a little bit better on its own, the spreads are better. But then again, if it's labor over

03:03inflation, what about jobs week? Let's talk about jobs week. What are you seeing? What are the

03:07indicators? So the ADP report came out and we're always like, you know, when there's no government

03:12data, we resort to ADP. And we're like, you know, the time they get they get a lot of attention. ADP

03:19report missed estimates. They were looking for 45,000 jobs created, but only 22,000 bond yields didn't

03:28really react too much. And if there's almost like the 10 year yield is doing what what I think it

03:34properly should do if the Federal Reserve is hell bent on just getting to neutral policy as slow as

03:41possible. Then if the jobs data isn't creating negative jobs, there is no rush for Jerome Powell,

03:50the Beth Hammocks, the Lori Logans, the Austin Goolsby's these people to cut rates, because they don't see

03:56that as the problem. All Jerome Powell and the Fed did is have one extra rate cut last year that wasn't

04:05planned. So, you know, this year it's like two maybe throughout the year. But again, there is no real

04:12big rebound in the ADP report. So we'll have to wait for the BLS. But the 10 year yield is that

04:18multi month highs right now that looks normal to me like, you know, the range we gave is 460 on the high

04:25end, 380 on the low end, you get to 4 to 380, you better have weaker data to support that.

04:33If the jobs data starts to improve, then there's no reason why the 10 year yield shouldn't go higher,

04:40because the growth rate of inflation is still 1% off target. And Jerome Powell is not, you know,

04:47does not want to get financial conditions any more easier, especially the Beth Hammocks and the

04:53Lori Logan's of the world. So that's something we have to keep an eye on with job openings and the

05:00BLS report. Now, if everything stays as is, we're just going to kind of be in this lower end of this

05:06channel. But this is the reason I had 6.75 and 440 to 460 in the 10 years that the economy outperforms

05:14or the labor data outperforms what people say, and we have the lowest bar in the 21st century,

05:21then you know that there's your case for high, higher yields and higher rates to a degree.

05:27Are there any other sources you're looking at besides ADP that you're like, this, this is giving

05:31me an indication?

05:32We have some, we have some other private sector, sector, Revlion and, and other data lines that

05:39we're tracking, and they kind of look all the same to a degree. I think people are waiting to see

05:45if there's any reacceleration. And remember that when we think about what the Fed was talking about

05:51last year, it was Christopher Waller that was highlighting the labor risk before Powell and the

05:58Beth Hammocks kind of had to give in. And what Christopher Waller said last week that, you know,

06:04he thinks all the jobs gains can be wiped out in 2025 after the revisions. So the revisions are going to

06:11be key because a lot of times when you get toward the weakness of a labor data cycle, the revisions tend

06:18to be very negative. When you start to get in an up cycle, you know, in, in jobs, the revisions tend to

06:25be positive. I used to put a chart out at this, you know, showing like two decades of positive

06:30revisions and negative. So it's not abnormal to have negative revisions. Just remember the negative

06:36revisions is a small portion of the general workforce. There are over 162 million people

06:41working. So when people say 800,000 jobs were not gained or lost in one calendar year, just remember

06:48one and a half to 2 million people lose their jobs every month. That's normal. So we're still somewhat a

06:54little bit under normal on the monthly layout. So in that context, revisions are key. But if there's a

07:04reacceleration of jobs, then that that's a whole different story, then you could get the 10 year old a

07:08little bit higher. But we've done enough rate cuts to get down to here, at least for everyone listening, the

07:15mortgage rates are near 6%. That that is a positive for everyone here. So we want to look at the revisions of BLS, we

07:24want to see where the wage growth is. I 100% believe that the Fed really wants to get wage growth down

07:30because they feel that's the best way to get to 2% inflation.

07:34Okay, so a little bit this this story continues to twist and turn as far as like the DOJ

07:41investigating Powell and the Fed, because of course, when we've had a Republican senator say he's not gonna he's not

07:50gonna vote for the nomination for Trump's nomination wars to join the Fed, if there's still this investigation. And

07:56just this morning, Donald Trump was like, I'm not stopping this investigation into the DOJ. But we know that that could

08:03change by the time we're done with this podcast. But but it is interesting to me, because to me, this is an easy

08:08win for him.

08:09So there's a there's another angle to this. Trump doesn't want

08:14Powell to stay as one of the Fed governors. You know, he can leave. But, you know, he doesn't

08:23necessarily have to leave the Federal Reserve. So this is this whole thing isn't so much about Kevin

08:30Warsh. This is, hey, listen, if you want to go, go. We don't want you here. I'll shut it off.

08:37They might not publicly say that. But that's what's really going on here is that they do not

08:44want Jerome Powell part of the Federal Reserve at all. He's going to be Fed chairman, but he could

08:50still be an active governor. So if this keeps on going out, you know, a lot of people say, well,

08:56he could just end this and Warsh gets they do not want him at all. So this is kind of one of those.

09:02Hey, listen, you can do this. We can make your life easy and just go off.

09:07Because I think there's some fear that Powell will stay as part of the Federal Reserve

09:11board members, and then he'll just be a pain in the butt to them going out in the future.

09:18So it looks like a game of chicken, because Jerome Powell does not strike me as the type

09:22of person who's going to be like, oh, yeah, you know, after all of this that I've taken,

09:25I'm going to go ahead and and just leave on on because you're investigating the Fed or me doesn't

09:31seem like that to me. Well, there are there are some rules that, you know, if they can't elect,

09:36then the Fed board can elect their Fed Fed chairman if if there's a vacancy out there.

09:44So there's some technical legal stuff on top of everything we're talking about. I know Myron

09:50gave up his White House title, which is still crazy to me that he was there.

09:58And it's just like we're we're we're in a strange world in any way. But so I think they're they're

10:04putting their their footprint on here. And again, we we the Lisa Cook situation doesn't look like,

10:11you know, for now that Trump could fire people. So he's going to need all the ammunition he needs

10:18with his Fed chessboard game. So this is a game. This is a back and forth game. I just to me,

10:24just I feel like the White House is not convinced Powell will leave. And, you know, Powell versus

10:34Warsh is, you know, that's going to be something if that is part of the process. So it is what it

10:41is this is this is very abnormal. The whole thing is completely abnormal. But this is the world we're

10:47dealing with. And we just kind of play it. So if some people are wondering, why does he just call

10:51it and so get Warsh accepted? This is a game of chicken for Powell. Powell said, Hey, listen, I'm

10:58gone. I'm done. And we'll take it from there. But that's Powell's only card he has, you know,

11:07to play as well. All of that aside, you still feel very confident in your mortgage rate forecast

11:13on the low end and on the high end, correct? Nothing, nothing changes for me, because to me,

11:17the labor data matters more. I think, you know, last year, last year was a really good test case

11:22where so many people had so many different reasons. Remember, like last year, how crazy it

11:27got that people said that we needed to create a recession to bring rates lower because we couldn't,

11:33we couldn't finance all this debt, all this treasury supply that was, I mean, America's broke.

11:39And oh, my God, you know, we have to create a recession to get rates. It's like, oh, crazy. And

11:44again, summer camp, all these people get into like a summer camp. And then they say, everybody say

11:49this one line together. So it makes sense on the internet. And no, so the range stays the same.

11:56The labor data is the only thing that moves me. And the reason I say this is 2023, 2024, 2025.

12:05Okay. There was all these reasons for rates to stay elevated, but whenever the economy got a growth

12:10scare, bond yields went ahead of the federal reserve. Now in the past in 2023 and 2024, we didn't

12:18have weaker labor data. We had a, we were presuming that things were getting worse and then yields,

12:23which go straight up. Now we don't have the yields going straight up anymore. They're bouncing off of

12:30the low end of the forecast correctly. So, because if, if the, if the jobs data isn't getting weaker,

12:36I don't think Powell or the bet hammocks or the Lori Logans or the Austin Goolsby's or the Neil

12:41Kashkari's are going to say, Hey, listen, we need to get to a commative policy as soon as possible.

12:47They can easily say that wouldn't be a problem, but they are just fighting tooth and nail on that

12:55one. And again, this is just getting to neutral policy. We have no discussion of a commative,

13:01right? So if the labor data, we don't want it to break, but if it does break the whole dynamic

13:07structure of everything changes. And I think any of you have seen me live and do my presentations,

13:12you know, what housing looks like in a recession, we all of a sudden get that next leg lower in rates

13:18that we haven't had within a cycle. And then all of a sudden, majority of the people are still

13:23employed and, Oh, whoa, rates are five and a quarter. Oh yeah. You know, so that's, that's the

13:30history of economic cycles. That's why we'll, we want to keep an eye on labor data. And the jobless

13:34claims data was always their key and it's still low. So that's something that by the time this podcast

13:38comes out, we'll get that out. But when jobs Friday comes, check the revisions, because

13:43Christopher Waller said revisions are probably going to lead to negative, flat to negative job

13:48growth in 2025. A wage growth is key. Why do we like, why do we talk about wage growth? Because

13:53the federal reserve believes old school thinking 3% wage growth, 1% productivity, because they don't

13:59really believe in the product. Actually, Warsh and them believe in the productivity gains, but

14:031% productivity, 2% inflation. I believe Warsh and Myron and all these people are going to say,

14:10Hey, productivity gains are great. We can cut rates because of that. That'll be the talking point,

14:15probably going out for the rest of the year. We'll cross that bridge later when we get there. But

14:19for jobs, whenever the labor data comes out, keep an eye on unemployment rate, wage growth, revisions.

14:25Um, and, uh, we'll take it from there because Powell's just, just a few more months left before

14:31he, uh, he leaves, uh, the Fed chairman role. Logan. Well, thank you as always. We're going to

14:36see you next week at the housing economic summit and our audience. If you have not gotten tickets

14:40yet, you should, we're, we're getting close to our number, um, there that we can hold in that room.

14:45And it's going to be incredible because we're not only giving you the economic insight, but also just

14:50like the tactical, what you should take from that information and apply to your business. So

14:54encourage everyone to come that can come and see Logan in person, do a Q and a with Logan and Barry

14:59Habib that I'm going to be moderating. So that will be really fun. Oh, you're moderating that. Oh boy.

15:04I'm going to get, I am. Okay. No, Logan. No, stop it. Listen, this is my specialty is, is, uh, you know,

15:14people were talking about that and he said, they're like, Oh, Sarah has such a hard job. I bet she has to

15:19tell, you know, a lot, you know, I said, you don't realize how many times we have to stop this

15:24podcast. Do not put that on the podcast. He can't say that. Yes. I mean, it's part of my job, but,

15:32uh, but Hey, I'm good at it. So there we go. Um, all right, well, we will see you again soon,

15:36Logan. Thank you so much for being on. Pleasure.

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