The big miss on jobs, escalating oil prices and mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the big jobs miss, surging oil prices, Iran news and how all of that is affecting mortgage rates.   Related to this episode:   Negative jobs report keeps mortgage rates calm amid surging oil prices  https://www.housingwire.com/articles/payrolls-oil-yields-swing/  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 m

Transcript

00:10Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the big jobs miss,

00:16oil prices surging, the Iran news, and how all of that is affecting mortgage rates.

00:21Before we jump in, I want to thank our sponsor, Trust & Will, for making this episode possible.

00:26Logan, welcome back to this podcast in what we can only describe as another day of 24.

00:32Oh, it's like the hair is going to go crazy and nuts, just like the markets did all week.

00:38Wow, wow, wow. Sarah Wheeler, I have been doing this for a very long time, and this is about

00:44one of the craziest weeks ever. And I thought about what we have done all week long, starting

00:51from last weekend's tracker, where he talked about that 4.15 level, but for the 10-year

00:57yield and oil prices. If WTI oil could get over 82, it has legs to go well. As we are

01:04talking

01:04right now, WTI is at $92. The 10-year yield is at 4.11. We had a negative jobs report.

01:14We talked

01:14about how this jobs report could be quirky, but even if I take the quirks out of it, it's

01:18still a soft report. In any case, bond yields fell, of course, right away. And then Trump

01:24did some social media posts that he wants unconditional surrender. Bond yields vertically went up, back

01:30to the highs of the early morning. Oil prices made another leg higher, but then the 10-year

01:35yield is coming down. So as I am talking at this second-

01:38On Friday.

01:40Yeah, Friday morning, we went from 4.18 to 4.11 to 4.18, now down to 4.11 again.

01:45Mortgage pricing

01:45is pretty much flat. We might get a repricing lower for the day. All of y'all, hug a mortgage

01:51spread, kiss a mortgage spread, take a selfie, you give it extra Christmas presents, send a

01:55cake for half-valentine's, whatever it is. This has been one of the craziest periods in recent

02:01history and mortgage rates are just chilling. Kind of like Eric B and Rakim, they got a master

02:08plan and they did it. And I always thought that mortgage-backed security purchase was a defensive

02:14move for maybe drama coming up. And it's just, this was it, man. This kept things lower.

02:21It's a great overview. Let's dig in on the jobs report because big miss there. So I wanted to know

02:27what part of this quirkiness do you think is going to stay with revisions? And what is this really

02:32telling us?

02:34The labor market has been getting softer since the start of 2025, right? We're constantly having

02:42negative revisions. Nothing has really changed on that. But I thought what we talked about

02:48yesterday about the 10-year yield is not budging higher, even with inflation data picking up and some

02:55of the economic data, ISM service, all these things are picking up. So if you looked at some

03:00of those data lines, they're very expansionary. But then I brought the theory about maybe it's the

03:06breadth of jobs that's keeping rates lower than what people think. And there's only two sectors

03:14of the labor market that have been growing for the last 14 months, and they went negative.

03:20And when they went negative, yeah, that means all the jobs are going to be negative because there's

03:24nothing to replace that. This entire week, Beth Hammock, paging Beth Hammock from the Cleveland Fed,

03:31labor market is robust. In any case, Schmidt, Kashkari, there's a whole lot of people that were

03:39like, hey, listen, maybe the next rate move might be higher. But they've kind of lived off of that

03:46unemployment rate and jobless claims being low. But maybe the bond market just doesn't care.

03:51Maybe the bond market just says, we're at 21st century lows of the jobs data. That's not going to

03:58get us excited to start selling bonds off. So of course, here we are today. I imagine that

04:07if there was no Iran conflict, Sarah Wheeler, we might be talking about the hooter line.

04:13Wow.

04:15But the 10-year yield might be getting close to 380.

04:19Which would mean mortgage rates at what?

04:21I mean, mortgage rates, I mean, the spreads would get a little bit worse during that

04:25in that environment. And it would keep the volatility compressed that. So

04:31best case, 5.75, 5.875. Something to that nature.

04:36If we didn't have the Iran.

04:38If we didn't have this Iran conflict and oil shooting up. Because it's a very,

04:41a lot of people, we always do these Q&As on Instagram stories on Friday. And we're getting a lot

04:47of,

04:48does mortgage rates follow oil prices? And we went from $56 to $92. Mortgage rates went from 5.99%

04:57to

04:586.13 today or 6.14. The velocity of the moves can't match it because oil's gone vertical,

05:05parabolic in a sense. And the 10-year yield, it's very hard for the 10-year yield to explode higher

05:10with Fed policy and mortgage spreads. So that's the sophisticated takes on this. This is why that

05:17if you're trying to listen to people who talk about mortgage rates and 10-year yield, if they have no

05:23training on spreads and Fed policy and anything, this is probably really confusing.

05:27So I just think if there was no Iran conflict, you can make a case that rates would be lower

05:32today, right now, because it would just basically say, hey, listen, the labor market is not.

05:37But because oil prices shot up, it becomes this tug-of-war fight on inflation versus labor. But

05:45what if you just have an economy that's still growing, just not having jobless claims break

05:51or big layoffs and just stuck out here? And I think that's where I would love to have

05:59the Beth Hammocks and the Schmitz and the Austin Goolsby. So Austin Goolsby had to come out today

06:04and kind of like, he finally had to admit, okay, this isn't good. This would be really bad if this

06:10kept on continuing. So I think the hawks now are kind of, because we're just talking about getting

06:14the Fed policy to neutral. This is not in a common stance. We're just talking about maybe two more

06:20or three rate cuts at best, and that's it for the cycle. But it's a tough one out there.

06:28Like, you know, I always measure, like, there's a certain group of people, whether they're stocks

06:33or bonds or whatever it is, if they are talking to me, which I rarely listen to them or hear

06:38from

06:38them, everyone is confused, right? But if you do paper, rock, scissors, labor over inflation, this is

06:47the ultimate labor over inflation day. And here we are with a 10-year yield at 411 and mortgage spreads

06:53keeping rates lower for longer. It's so confusing. So when you think about,

07:00and it's changing, by the time we get off this podcast, we know, we were even like,

07:06you know, it's hard in this format to react as quickly as we want to, just because things could

07:12change. Because things changed this morning when President Trump announced that, like,

07:17no, this isn't going to be quick. We're going to have to have basically ultimate surrender from

07:21Iran before we leave. That's not a quick war. That's an escalation, which is what you've been

07:25talking about all week is like, we're the markets trying to figure out, is this long? Is this short?

07:30But we know with him, it could change. There is a solution to this, Sarah.

07:35Tell me, what is the solution? Twice a day, seven days a week.

07:45When you commit to this conflict, and you're talking about regime change, you can't basically

07:53come out there and go, well, oil prices are up and people are going to get mad. You've got to

07:58constantly say, you know, you're going to go all in. You don't want to show any kind of weakness. So

08:05him saying that isn't shocking. I mean, you can't, you, both sides are like, you know,

08:11even if both sides wanted to do a deal right now, they can't make it public, right? That's just not,

08:16that's just not how it goes. But once you make a commitment here, I, you know, the Trinity thing,

08:23we always said, it has to be lower oil prices, lower rates, lower dollar for this to work.

08:28Now he lost the lower oil prices. And again, he can just end this like this, you know, if he's

08:37got

08:37that power to, to, to solve this. I mean, can you end something like, uh, it's gotten, you know,

08:44a little bit, uh, trust me, the Iranians are getting their, handed to them. They will end this

08:50in a second. The Chinese want that oil full of the whole world wants everything going right. You

08:55can't, you, uh, this is a very one-sided, uh, uh, uh, uh, attack here. So the Iranians would easily

09:03take a deal. Um, but for now, I mean, who knows by the end of this day, who knows by

09:10the weekend,

09:11who knows by the time Monday comes, things will change 24 seven Logan. See, do you see,

09:16do you see how I had a really good idea last year? It just, you know, you should have just

09:20gone with

09:21it. Um, but for us, for everyone listening, same story, labor markets getting softer. It's not

09:29breaking, right. You know, jobless claims isn't breaking. ISM service was positive. Retail sales

09:34were fine. You know, growth is still there, but the question is, how do you handle this? If you're

09:40the federal reserve, like, what do you say to the, to, to the 21st century lows in, in job ratio?

09:47And then

09:47last month, the jobs data beat, of course it gets revised, but you know, um, at some point people have

09:54to address this because you can't have an economy basically running on two labor sectors. Uh, uh,

10:00there has to be growth. So I would imagine that internally, some of the hawkish people are probably

10:05saying if this kept on going on for the next four or five months, we have to change our tune

10:10because

10:11this is not what, uh, uh, what we even subscribe to that the labor market is fine in that regard.

10:19So it's, it's, it's, there's so many crazy things. I, I, I don't have enough time to even input all

10:25the

10:25data lines and explain it, but I totally get it. Why people are confused. But the main thing is that

10:32oil prices shot up. PPI inflation is higher. The price is paid as higher. We're about to have 15%

10:39tariffs and the 10 year yields at four 11 and mortgage rates are at six 14, probably most likely

10:44you get another adjustment pricing lower and we're just here. And that's all. We've just got to be

10:51super thankful that mortgage are our industry super thankful that we can somehow have a lower

10:56mortgage rates right now, given all of the volatility. And again, 65 to 75% of this is still

11:03fed policy. We have a lot of rate cuts in the system and the spreads have gotten better,

11:08right? So this whole, the, the whole trying to teach mortgage spreads for the last two and a half

11:13years was that that was a really bad story in 2023, but now it's the unsung hero, right? So, uh,

11:23What did you put, you put a, you put a, um, a video or a picture of punch the monkey.

11:28Yeah. Punch the monkey. And I say, y'all got a hug of mortgage spreads. Like punch the monkey is

11:33hugging that thing. And I'm hugging punch and, you know, and punch is hugging the, you know,

11:37that's how you should hug a mortgage spreads because imagine, imagine if the fed didn't cut

11:43rates as much as they had and mortgage spreads were still elevated seven and a quarter, eight and

11:49a quarter, uh, mortgage rates today. Right. But we have a lot of rate cuts in the system

11:55and 65 to 75% of the slow dance that we've always talked about at all. The nerd tour events

12:02is still fed policy. It isn't the 10 trillion dollars of treasury supply that we're a broke

12:08country. So the slow dance for, for those is the distance between the 10 year yield and slow dance

12:15between the 10 year yield and the 30 year mortgage. And what do we say? We like intimate 1970s soul

12:21train. So, uh, Sarah, I'm going to get you on stage one day and we're going to do the slow

12:26dance and

12:26we're going to say we want intimate slow dancing because that means mortgage spreads are getting

12:31lower. We don't want, you know, slow dancing far apart because that means the spreads are wide.

12:36So I I'm trying to like get it into people's head. Like, how does this work? And the, and the

12:41slow

12:41dance is a very good thing to show the history of the 10 year yield and 30 year mortgage and

12:45then

12:45the spread variable. So. Right. Because they're in this together, they move together, but it can be

12:50either close together or far apart. So I do think it's a, it's a good analogy, never getting on stage

12:55dancing, by the way. Um, okay. But I have another question for you and that is, I've seen a lot

13:01of

13:01headlines since the jobs report came out. Does this mean we're heading into a recession?

13:05Okay. A recession, same thing as late 2022. We have never had a recession until jobless claims break.

13:16It's never occurred one time. We also, when we have recessions, multiple things kind of tend to happen.

13:23Industrial production falls, investment falls, consumption falls, all these key data lines,

13:29real retail sales, all these things fall here. The unemployment rate is still low.

13:35Wage growth is still, you know, holding up, um, investment and consumption are still holding up.

13:42You don't usually have recessions in that environment. Uh, it late 20, even late 2020,

13:48all my six recession red flags were in together on August 5th. And he said, okay, now we focus on

13:53the labor trigger, but the 10 year yield fell and mortgage rates fell and the builders were,

13:57you know, keeping employment. When you look at the construction data, specialty contract trades,

14:03we're losing job, but not waterfall dive. Residential employment has fallen the last six months,

14:08but not a waterfall dive. We're so used to linear explosions and unemployment rates and jobless claims

14:14that that would be our trigger. But here, this is just, this is just like a mud fight. You know,

14:20you know, we haven't had a cycle like this. And this is why I always like to stress to people,

14:23if you look at the unemployment rate and jobless claims, when things break, they break. But this

14:28is so slow that, you know, GDP estimates for this quarter is still at 2%. But now, you know,

14:36we got the tax cuts coming in, you got, you know, expensive, it's just one of these things where

14:42I've, I saw this happen to a degree in the first trade war, but then they started making deals.

14:48And oddly enough, the Supreme Court ruling, which a lot of people said, okay, now we're going to be

14:54free and clear and go it now putting 15% unilateral tariffs here puts a little bit more chaos into

15:02it.

15:03So it is what it is. You know, this is just, I understand it's confusing, but you don't

15:10traditionally have an economy go into recession with low jobless claims and the economy still

15:14growing and the unemployment rate still at a certain level. And to me personally, like the Fed's old way

15:19of thinking is that 5% unemployment rate would still be full employment, you know, that, you know,

15:24you can grow this, but it's confusing. I, this is not, I think bulls or bears are everything.

15:29This is not something you got to, you got to show your economic game and broaden that out and

15:34talk about reports that not a lot of people know about. So I get it, but main premise is always

15:42labor over inflation. We would not be here if the labor data was beating estimates and the job growth

15:49was running at 130,000. I tell you all, we're 7% plus mortgage rates. And it, that's, y'all

15:57should be

15:58grateful for that here. Cause you think about this crazy week at mortgage rates or whatever, dude,

16:05just chilling like this shirt. Um, you know, it looks like I'm going to Hawaii, you know,

16:09going to put some shades on, drink a Diet Coke by the, by the pool and just like, look at

16:14the 10 year

16:14yield. You're a wild one. Let me tell you, Diet Coke by the pool. Um, no, this is, this is

16:21great

16:22analysis. Um, I really appreciate all the work you've done this week. Feel like it's been

16:25very informative, um, and just fast changing. And we had four, four conversations before

16:32this podcast, like this happened. No, no, no. Now this happened. And it was like, I just appreciate

16:36you keeping up for all of us and fingers crossed that those mortgage rates stay here or go lower.

16:42So, you know, one of the interesting thing is, um, uh, a counterpart friend of mine, Neil Dutta,

16:48Neil Dutta, who people wanted him to be one of the federal reserve, uh, board members.

16:53He listened to the mortgage spread, you know, a hug of mortgage spreads. And he thought that

16:57mortgage spreads could get wider. So I do get this question. So if you look at the history of

17:01mortgage spreads, what are two things that could keep mortgage spreads to go up? The federal reserve

17:07has to get hawkish forward guidance or like a recession just comes out of nowhere. Why is two

17:12basic, simple things, early payoff, you know, that, uh, the higher the rate goes to the higher

17:17probability that, that, that might get paid a refinance earlier. So investors need to be

17:23compensated. And a job loss recession means that there's some risk to people not getting their

17:29payments because somebody loses a job. Those two things could be variables to go up there. We're,

17:34we're not there for either of them. And this is why we've had this crazy year and mortgage spreads

17:41haven't gotten wider. In 2023, what occurred was mortgage spreads were improving. We're heading in the

17:47right direction. Then the Silicon Valley banking crisis happened. So a lot of people thought that

17:51was recessionary, but then the federal reserve kept on hiking rates during the Silicon. So spreads

17:56got to the cycle highs. We don't have that environment here. So I know a lot of people think,

18:01well, if there's market drama, the spreads should get wider. Why aren't they getting the, what the

18:05spreads are doing right now are normal. But if you wanted to make a premise that spreads get noticeably

18:11wider and stay wider or are noticeably high, you need, you know, they're fed to get hawkish or all

18:18of a sudden something happens where the market really believes we're going to start losing jobs

18:23in big fashion. None of those are here yet. So the spreads are pretty much acting normal. But I thought

18:29that was a legit question. I did try to explain that on X. By the way, X is a pit

18:34of hell. Like that is,

18:36but I got to tell you, it is so quiet for me. Like I, because I keep on challenging people

18:42to live

18:42debates and nobody wants to do it that no one, no one really wants to talk to me. So it

18:46is like

18:46in a crazy world we live in, my Twitter account is like the most peaceful area because hardly anyone

18:52says anything because they're too afraid I'm going to challenge them to a live debate. In any case,

18:58it's a crazy week guys. And, and I encourage everyone. I don't do anything to follow this stuff.

19:05If you just follow me on Instagram, I try to keep everyone as posted, but the tracker articles are

19:09designed to keep people in line to what matters for those that are listening here, real estate and

19:15mortgage. Right. And now you have housing wire intelligence. You have access to data that, you

19:22know, in previous decades, only wall street would be remotely maybe have the capacity to have. So

19:29always focus on the key data lines that matter. That's why the tracker was created

19:34with all this crazy noise out there. If you just follow the tracker, it keeps everyone in line

19:40to what's going on out there. And there was a lot of noise and there's a lot of confusion.

19:45This is not a normal time. And this is 24, like all the seasons put together and then their reunion

19:52show, and then a movie added together out there. So it's, it's nutty. And of course,

19:59Keeler Sutherland got arrested this year or something, you know, for the, the Uber driver

20:04event, man. So it's just, it's crazy, man.

20:06It's like real life catching up to the movies. It is crazy. Just to follow up on that. The tracker

20:12is always available on housingwire.com under the news tab. You can just click on housing market

20:17tracker. It has all of the ones. It also has all of the charts updated that, that Logan looks at

20:23for

20:23the tracker and then housing wire intelligence. You have to be a subscriber and you can find that a very

20:28easily on the homepage. Just click on housing wire intelligence. It'll bring you there.

20:32And this is to all the executives in mortgage and real estate. We're having our gatherings event at

20:37the end of April with all the top people in both. Like if you really needed to know what was

20:42going on,

20:44like, you know, not these kinds of little Mickey mouse events. If you want the legit big players on

20:50both, that's the place to be, right? We only do one of these a year. These, these, these big events

20:55where we get everybody and you have every main person in there trying to talk. And by that time,

21:00by April 27th, man, we're going to, we're going to have to get a lot of things answered because the

21:05longer this goes on, this conflict, you know, uh, all agents of chaos and variables and things that

21:11you don't know, or can't see if all of a sudden other crazy things happen, it could get wild out

21:16there. But we leave you all with this one thing that Sarah and I have been saying for, since the

21:21end of 2022, paper, rock, scissors, labor over inflation. This is the ultimate day because oil is

21:30going vertical out here and you've had hotter PPI and P, you know, PC inflation and prices paid and

21:37tariffs and everything, but man, hug that mortgage spread out there like punch.

21:44All right. Thanks for bringing us home. That's perfect. Thank you, Logan.

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