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On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the negative jobs data and how that could impact rates.
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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.
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.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the negative jobs
00:15data we got this week and how that's impacting rates. As always, I want to thank our sponsor,
00:20Trust in Will, for making this episode possible. Logan, welcome back to the podcast.
00:24It is wonderful to be here. And of course, yesterday we talked about jobs week and
00:29previewing it. And technically, jobs week is over, right? We're going to get the BLS jobs report
00:35next week. But again, to me, we have all this talk about growth and inflation and Kevin Walsh and
00:45anything. But whenever the labor data gets weak, 10-year yield just drops. And this is Thursday
00:56morning. And I think this is a good test case of how to explain. For me personally, after 2010,
01:04after qualified mortgage came into play, which values the mortgage buyer a little bit more with
01:10credence because qualified mortgage made sure that everyone's legit. The housing market data really
01:20revolves around the 10-year yield, just like the slow dance. How we always talk about the slow dance
01:24with the 30-year mortgage rate. But because a qualified mortgage was put in, it really puts
01:29a little bit more emphasis on mortgage demand being the big driver. But even though we didn't have jobs
01:36week fully, let's review every single one. ADP report weaker than estimates. The jobless claims data
01:46spiked. I would say that's the winter storm because it's majority coming from places where winter was very
01:52heavy and people were kind of blocked in their house. Number three, the job openings, the headline
01:58job openings data missed the estimates by a lot. But the internals were just mostly the same, softer
02:03labor market, no hirings in big fashion, no firings. But then we get into the Revolio data. Revolio Labs is
02:11one of those new private sector jobs things. And that even showed a negative report. So with everything
02:18in play with GDP growth up and inflation above target still, all this talk and the 10-year yield
02:30fell noticeably after a week labor report, that multiple labor reports that doesn't even have to
02:36do with jobs Friday yet. Okay. So from your perspective, is that the right call or do you
02:40think that the market is overreacting to what these labor reports say? In the past, in 2023,
02:48the Gandalf lie, we said, we're not going to recession, we shouldn't be here. That was warranted,
02:54right? The reversal in yields. 2024, when the Hodor line at 380, when it broke and people thought
03:01the job market wasn't breaking. Now it's different. And it's different, I would say,
03:08in one of the more prominent times in history, because last year, treasury supply, inflation,
03:14you know, all these things were supposed to keep yields higher, but the 10-year yield went all the
03:18way down to like 3.95% even. But here it becomes, I mean, I got to tell you, it has to be confusing
03:25for the public or people in the real estate industry. Here you have a very unique situation.
03:30You have the lowest job growth in the 21st century, but you don't have big fires yet.
03:37You don't have a lot of hires going on. You have negative revisions. We have trade wars. We have
03:43tariffs. We have all these things going on, but we don't have that big layoff. And yet we have GDP
03:48growth still positive, consumption still holding up. So I think, I believe the 10-year yield is trading
03:56more discipline now in 2025 and early 2026, because we're talking about it. The last time I saw it was
04:04421 on the 10-year yield. Last time I saw mortgage rates getting down to 6.17%. But if you believe in
04:12neutral policy like the Federal Reserve does, this is kind of the low end range of what neutral policy
04:18would be like, even with spreads being almost back to normal. So kind of, I think it looks perfectly
04:25normal, but I think it's confusing for everyone because people are anticipating like the Fed to
04:31really cut rates and maybe rates go lower. But this Federal Reserve, the governors do not believe
04:38getting to neutral policy as fast as they can is the right way because to them, they just see
04:43inflation above target and the labor market isn't breaking, which goes back to our 2022 premise that if
04:51you want the Fed to really pivot, like a lot of people want, and rates to go sub 6% and make that next
04:57leg lower, the labor market has to break and jobless claims isn't breaking. And the Challenger
05:04report, which is another data line, that had the highest layoff announcements since 2009. But that's
05:10a very, very small labor pool data line to track. So the Fed doesn't really put too much weight on that.
05:19So the Fed is always looking at jobless claims, right? But what you're saying is like,
05:24we're not seeing hirings, but we're not seeing firing. So won't that keep,
05:28like, won't that sort of suppress the index that they look at?
05:31Well, to me, like the job openings data, they like it because they measure the breadth of the labor pool.
05:38Like when job openings were at 12 million, they didn't like that because employers have too much
05:43power. They can quit their jobs and get higher wages and wages go up and inflation gets more sticky.
05:49But here, the job openings are finally well below enough from pre-COVID levels. But wage growth is
05:57still above 3%. So I think they just feel like, and they've said this a lot, it's softer, but it's not
06:05breaking. Who else uses that term? We've said it for like 24 months now. The labor market's getting
06:11softer, but it's not breaking. So it really is kind of what your cup of tea is. Some people would say,
06:18like Christopher Waller and them, hey, listen, we need to get down to neutral as fast as possible
06:22because if something happens and the labor market starts to break, we need to get into like the
06:27accommodative stance faster. Some people just say, hey, listen, inflation is above target. Consumption
06:33is good. GDP is still growing. It's just one of those really, really strange cycles where you see
06:40good growth, but you don't see much hirings. And this can't be all labor force, right? Where we have
06:48to like evolve from this, this labor force growth is slowing down and that's why we can't get jobs.
06:53There are sectors of the economy that aren't really booming. And because of that, their labor pool isn't
06:59really growing as much. And we would see that in a normal expansion, like when jobs are growing and
07:05revisions are positive, that these sectors kind of participate. Okay. Well, let's talk about housing
07:11as a sector, right? Because we know we drive a lot of the economy, but at the same time, the Fed
07:16doesn't care about housing. You've said that many times. Because, you know, for example, let's take
07:21some labor pools. The construction workers, especially contract trade, they've been losing jobs for a few
07:27months. The residential construction workers that I track a lot that, you know, typically this data line
07:32fades, that data line has gotten softer after the revisions. So it's kind of like that one theme we've
07:39had since 2022. They are going to stay as restrictive as they possibly can until the labor market break.
07:46And then they'll play catch up. Like, you know, the Beth Hammocks of the world literally told people
07:50in public, well, the labor market is softening, but we don't think it's breaking. If something breaks,
07:54we'll play catch up. We'll be more aggressive. But it's confusing. I totally get it.
08:00You see these 4% GDP prints, you know, but manufacturing jobs have been losing jobs since
08:06early 2023. We don't see housing starts and permits growing. That's what you would traditionally see
08:13in a cycle, because they see now policies slightly above neutral, like, you know, just barely restrictive
08:20to a degree. But here it is. I mean, this is legitimate. This is now we're going into February and
08:27the January data. You can make some cases the snow is part of it or to that degree. But
08:33we haven't seen the reacceleration rate. But rates are, to me, properly priced with
08:39a Federal Reserve chairman and most of their governor still saying it's okay to take our time
08:47with the last two or three rate cuts, because things aren't breaking yet.
08:52Okay. So one of the things that we've really been in the housing market excited about is that we have
08:57less volatility with rates. So you feel like we're about where we should be. Do you feel like we can
09:02keep this for a while?
09:03Yeah. I mean, that's the one benefit of having spreads get back to normal. Again, spreads being
09:10normal is kind of how things usually operate. We've just had an elevated level of spreads for so long.
09:16So again, the only way I have the 10-year yield getting up to 440 or 460 is that the labor data
09:25has to reaccelerate, right? So we're kind of stuck. We're kind of stuck. We've been stuck
09:31in this area that I call it the little bowl with the 10-year yield since the start of January or start
09:37of September. And we've just been at this lower level. This is the lower end level of the 10-year
09:44yield forecast and the lower end level of the mortgage rate range. So I mean, it looks right
09:50to me. I think it's some people are just frustrated because they think that the Fed should be doing
09:55more. And then now they hear Kevin Walsh is going to be coming and he's going to do rate cuts. And
10:00Trump said he wouldn't have got the job if he wasn't going to do rate cuts. But the 10-year yield
10:04had been going up. But whenever labor gets weaker, it's like six data lines. They're all weak.
10:1010-year yield makes a fall. Stocks fall off a little bit. Money goes into bonds.
10:15Even though inflation is above target still, the labor data ran the show in 2023, 2024, 2025.
10:25And so far in 2026, it's still running the show. Now, if all these data lines were reversed,
10:32let's say all of them beat estimates. Let's say jobs Friday came in. There was 125,000 jobs created,
10:38unemployment rate fell. Then yields can go up a little bit higher. But there's a lot of rate
10:44cuts in the system. Spreads are good. So we just, again, focused labor, labor, labor, labor data. And
10:50Thursday morning was a good, you know, I mean, there's basically you could take six reports all
10:55into one. We just don't have the BLS jobs Friday report here. And that really pushed it. So a lot of
11:02talk about treasury supply, inflation above target, all that stuff. But whenever labor gets
11:07money goes into bonds.
11:10So we still, you know, we, we know that a change is coming, but Powell is still there.
11:14Does any of this influence him? Any of these six labor reports that, that are negative?
11:20If, if they weren't influenced enough with the last few months of 2025, then this is not going to
11:27really move their needle. This state, these data line prints have been here for some time in their
11:34eyes, how they would, if they were here on our podcast, they would say, we haven't seen much
11:40deterioration from the weak levels. Yeah. When, when Powell said the labor market is, you know,
11:47getting softer, there's, there's some problem there. So again, if, if the labor market data,
11:52which was getting softer, wasn't big enough for them to move, then here we are kind of the same
11:58story. Just remember that the jobless claims data is their number one data line. That's really runs
12:04the show. And the spike that we saw, it just looks like it was a snowstorm. So I it's, it's frustrating
12:09for a lot of people. I get it, but this is how the fed has operated because what was it? The spiking
12:16of the eggnog. Oh, right. Who, who spiked the feds eggnog? Whoever spiked the feds eggnog in
12:21December really changed everything. And here's a great example. I mean, we are literally 21st
12:27century lows and jobs creation. Some of these data lines are negative and they're just like,
12:33we're slowly going to get to neutral policy, you know? So it's a very unique cycle in that,
12:40in that front, there's a lot of things that are happening. There's a lot of deficit spending.
12:44There's a lot of AI spending out here, data centers being built, stuff like this that, you know,
12:50there's always a few subsectors of the economy that go into a recession. And then, you know,
12:54most people are always working always, but you know, those, those sectors just aren't deteriorating
13:00big enough to bring the whole economic cycle into what we traditionally see as a recession.
13:07Okay. So that was Powell. What about Warsh? Like is there, I know he's not, he's not confirmed yet.
13:12We're not even sure how that's going to work because of that whole DOJ thing, but is there anything
13:16he can do right now to, to influence things?
13:21If I was Kevin Warsh, which I don't think he'll do this because Trump wouldn't let him do it. I'll
13:25just say, Hey, listen, Jerome Powell, Beth Hammock, Lori Logan, um, Neil Kashkari, Austin Goolsbee.
13:34These people are behind the curve. And, uh, the reason I say this is Warsh did come on national TV
13:42and say, well, housing's in a recession. We need to get that back going. If I were them,
13:47I would frame it that way, right? Frame it that, you know, I would say traditionally in an economic
13:55expansion, housing permits grow, housing starts grow. We get more home sales, the multiplier impact
14:02in housing kicks out and that can generate more jobs. So the one area where the federal reserve
14:09does control a sector of the economy is housing, uh, in that you can, you can frame it that way.
14:16Just know there's limits to, you know, what you can do with, with rates, you know, uh, you're not
14:21going to get rates to three or four or even at 5%. So that's how I would frame it and keep that battle
14:28going. But hypothetically speaking, if the labor data reverses and things get better, it also puts
14:36him in a box about cutting rates in any big way. So, uh, it's a, it's a delicate act right now,
14:43but now that you have Warsh in, if you really wanted to go after Powell and the Beth hammocks
14:48of the world and these, you just kind of go into it and that be the shadow fed president out there
14:55and talk that, but Warsh has some really weird takes and the white house is already talking about
15:01reducing the balance sheet. And that confuses a lot of people. And, you know, we kind of joked
15:06that this morning, what if the, what if Warsh keeps on cutting, wants to cut rates and the 10 year
15:11yield goes higher than I joke that, you know, Trump's going to yell at him to do QE and the
15:16federal reserve has already said they're not going to do quantitative easing, uh, uh, unless we're at
15:21zero interest rate policy. So it's going to get very interesting, but it's also, I think this is,
15:28this is very confusing for a lot of people, um, um, because we've always had a federal reserve
15:33that's, you know, in the past kind of, you know, if the labor market was like this, you know, we
15:40already be in neutral policy. So there's, there's a fight here, uh, uh, um, for sure. And it's just
15:48February, 2026, you know, it's only February and a good timing, our housing economic summit next week.
15:55You guys, if you guys have not yet secured a spot, those seats are filling up, come and, and hear
16:01some of the best economic minds, especially on housing in the country at the same place at the
16:07same time. It's going to be amazing. Logan, of course, will be there. So Logan, thanks for walking
16:11us through all of the complexities. Pleasure, Sarah. And, uh, yeah, what fortuitous timing for that event,
16:17right. Cause we're going to have a lot of different dates and, uh, uh, you know, once we get this snow
16:23storm out of the data pool for housing, we could go back, uh, into that, but, uh, Oh, interesting.
16:31I mean, every, every, every week it's been what a week and, uh, we have one more day left and we're
16:35probably gonna say that again, what a week. And, uh, we'll just take it from there. Thank you.
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