- 3 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs report and how it could impact mortgage rates and what the Federal Reserve does next.
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
To learn more about Total Expert visit totalexpert.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
To learn more about Total Expert visit totalexpert.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
00:08Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about that
00:12jobs report. Before we dive in, I want to thank our sponsor, Total Expert, for making
00:17this episode possible. Logan, welcome back to the podcast on this Good Friday and Jobs
00:22Friday.
00:23Jobs Friday. You know what? Trump just did a truth social post and he was like, we're
00:28going to open up the straight and we're going to take the oil. You remember the old Mad
00:33Max movies? There was a guy who had a Jason Friday the 13th mascot and he had a microphone
00:42and he was giving a speech about giving us the oil. I'm like, homies, Trump just went
00:49Mad Max. We're going to take the oil. This is the world we live in. In any case, it is
00:57Jobs Friday. Jobs data beat estimates, 178,000. Unemployment rate fell. Of course, the previous
01:07month was revised 30,000, 40,000 lower. So when you average out the two months, because there
01:14were some distortions in the previous month, you're up to like 20,000 or 30,000. But if
01:20you take like the six month average, you're at like 66,000, 68,000, roughly right about
01:27there. The report just came out. So I try to get much of the breakdown. But to me, wage
01:33growth now down to three and a half percent, we are 0.5% away from the Fed declaring victory.
01:40Okay, because you said that they want to destroy wage.
01:44Yes, yes. Since 2022, the reason I have labor over inflation and everything, the Federal Reserve
01:51really believes that they can get 2% inflation as long as they need wage growth down to 3%
01:57or lower.
01:58And then they could take the 1% productivity trend. I know a lot of people think productivity will grow
02:04a lot faster, but 3% wage growth, 1% productivity, that's the way to get 2% inflation. So
02:10you cannot
02:11have wage growth. God, it was near 6% in 2022. You have to attack the labor supply. You have
02:17to make
02:17the labor market softer and softer. So wage growth goes down. So we're not there at 3% yet, but
02:23we're
02:23heading there. And then the Fed can declare victory. When we're at 3% or under wage growth,
02:29you're going to see the tone change from the Federal Reserve in a big fashion. So that's progress for
02:37them. They're probably very happy about that. So kind of, so sort of mixed if you look at this,
02:43but better, so it beat because we actually grew jobs.
02:48So the six-month average is above the negative 3,000 Dallas Fed, you know, right? That whole thing is
02:57getting, it's getting really lame, but jobs data is beating what a lot of people thought going into
03:04this year. Now, of course, this is, a lot of this is pre-war, pre-oil shock and everything. But
03:10one of the
03:11reasons I thought rates could go higher early in the year, not because of war or inflation,
03:16I thought the labor data, just because we're working from such a low bar, if it just gets
03:21about like 50,000 jobs created plus, you're beating estimates. And again, that doesn't mean
03:28the 10-year yield goes to 5% or mortgage rates go to 8%, but it could keep the 10
03:32-year yield elevated
03:34within that range that I always do every single year. Of course, that's not the reason why the 10-year
03:40yield went up. The 10-year yield went up because of the war. But the labor data is a little
03:46bit
03:46tricky, but if you look at an average, it's actually doing better. Like if you take a six-month average,
03:52it's only creating like 15,000 jobs a month. But if you take a three-month, it's over 50. So
03:58over 50 is like the Fed is like, hallelujah, labor market's fine because jobless claims are low.
04:05So everything revolves around jobless claims. If jobless claims stay low, the Federal Reserve will
04:11be, you're not going to get out of neutral policy. And if you're not out of neutral policy, it is
04:15very
04:16hard to get mortgage rates under 5.75% ever. Like that's one of the things that you, when people
04:22say, when are rates going to go back to three or four? No, never is going to happen unless you
04:28have
04:29a recession or you get out of neutral policy. It will stay like above that level for eternity.
04:35You need variables to change to get rates below that point. But yeah, so this is where we are.
04:43Of course, in a normal setting, this job support would be a little bit more interesting, but we are
04:48dealing with WTI oil prices still above 110. Whatever talks of Cormuz or whatever is going
04:58to happen between mediaries or everything, the 10-year yield on Thursday got all the way back
05:05down to like 4.29. So the 10-year yield is still doing what we've talked about for the last
05:10few
05:10podcasts. It's trying to get ahead of oil prices. Because if you had a straight of Cormuz done,
05:16then we could go back to the economic cycle. What's going to happen between the labor data
05:23and inflation and this? But the war threw everything off this year because we have to
05:29adjust to that. But if you take the war out of the equation, let's say it never happened.
05:34In PC, inflation was already above 3%. PPI inflation, we would have this debate about where we would be
05:41with a 10-year yield because the jobs data is, in theory, doing a lot better than what people
05:47thought. And the Federal Reserve looks at jobless claims and jobless claims are low. So a lot's
05:52going on. But again, the war is just leading everything on top of the food chain for now.
05:58So when it comes to the jobs data, a lot of people have felt like, can you trust the jobs
06:02data?
06:02And so, especially because, you know, next month it might be revised, you know, much lower, much
06:08higher. Like, how do you read this job story? Do you feel like, yes, we can, we should trust this?
06:12So very simple. Jobless claims is the most important jobs report for the last three years.
06:20It always has been. Job growth is slowing down. The Federal Reserve has accepted that slowing down
06:26and cut just a little bit more than they wanted to. They want to get to neutral policy. Neutral policy,
06:333%. You might maybe have two or three rate cuts left in the entire cycle, and that's it. So
06:40the 10-year yield getting down to 4% or even a little bit under is neutral policy. That's it.
06:46That's not going to go any more lower than that. Okay. So people think if the Fed starts to think,
06:51you know, anything different that you could get, it's really hard for the 10-year yield to get under
06:56380 with neutral policy. So a lot's getting priced in with the bond market when we're at 4%. This is
07:01why I created the Hodor line. Hodor, right? I got to say it. And that this is as good as
07:09it gets
07:10with neutral policy. A lot of people think that, you know, if the Fed cuts two or three more times,
07:17the market's already pricing that in. Market gets ahead, bond market gets ahead of the Fed action
07:21on the downside and the upside. It tends to overdo it on the downside and upside too, but
07:27it's a little bit more efficient and faster. So to me, it's, even if you created 15,000 jobs a
07:34month
07:34for the next three years, Federal Reserve is not going to lose neutral policy when inflation is
07:40above target, right? If inflation was running at 2%, then it's a whole different story. But when
07:48inflation is above target, as long as jobless claims are low, this year, next year, the year after that,
07:55don't think the 10-year yield of mortgage rates can make that next leg lower. If the Federal Reserve
08:00gets 3% wage growth and under, then I think some of the tone can change, but you need to
08:06get the verbiage out of them. But for right now, for this year, jobless claims are still low.
08:12The job growth is beating estimates in theory because the Federal Reserve are telling you,
08:17run rate is, you can have zero job growth forever and unemployment rate is low. So this is the world
08:23we live in.
08:25And this is why it's really hard to get the 10-year yield under 380. It's really hard to get
08:29mortgage rates
08:29under 5.75. But again, the best story for last year and this year, mortgage spreads, man. We wouldn't be
08:36here
08:37if it wasn't for mortgage spreads. I think mortgage rates were like 6.41%. If you think about all the
08:43drama
08:43that's gone on in the last like six weeks, and we're at 6.41%, and you're used to spreads being
08:50more elevated the last few years, you're just like, again, hug a mortgage spread. And the reason I
08:55highlight mortgage spreads is because it's so hard for me to model out mortgage rates under 5.75%.
09:01But if mortgage spreads just got kind of back to normal, housing can work with near 6% rates.
09:08That's why it's been a big part of my work for the last three years, especially the last 18 months,
09:13is that I can only get there if spreads come back down. Spreads should get back down in 2026.
09:19I thought it would happen toward the end of the year. But when they did the mortgage-backed security
09:23purchase announcement, we got closer to normal before that. So this is kind of the world we're
09:28working in. So that's how I kind of model it out. And I just think a lot of people just
09:34hear
09:35like Grant Control or whatever. That guy was like, mortgage rates are going to 4.5%. Kevin Warsh is
09:42going to come and cut rates. And guys, I scream from the top of my lungs. Dude, homies, there are
09:48people out there that are on YouTube and TikTok. Y'all should not be listening to them. Okay? They're
09:54just off the grid, man. They just say things that just don't have any models, but they're really
09:59catchy headlines for marketing stuff out there. So trust the nerdy people to model things out for
10:06you and take it. No, we trust you, Logan. We trust you to be modeling this out. So let's talk
10:13about
10:13what you expect for the tracker this weekend. So, you know, of course, let's go over for people.
10:18Mortgage spreads is one of the things that you track every weekend. We also have on the housing
10:23market tracker page, like all your charts, including the one for mortgage spreads. I use that chart a lot
10:28in the news that I send to subscribers because it's like tracking that. I know how important
10:35that is. So tell us what other things you're looking at for this weekend.
10:38So the growth rate two weeks ago slowed down. Purchase application data has been slowing down.
10:45It's still positive year over year, but we're barely positive. So last weekend's tracker was still
10:50positive year over year, but it's slowed down on a week to week basis. So we should see another
10:54slowdown in it. But again, we're also under 6.64 and near 6%. Now, if mortgage rates are above 7%,
11:03we see what happens every single time with the data line. So I just want to see as
11:07how much of a slowdown do we see on a week to week basis? Do we finally see
11:12some slight negative year over year declines? The housing market equilibrium with supply and demand
11:17is much different. Everything changed when Sarah? Changed mid June, 2025. Mid June, 2025. So if you
11:26were listening to any person on planet earth who told you that it's the greatest sellers market in the
11:32history, how home demand is at the lowest levels ever. And oh my, you know, if y'all listen to
11:37those
11:37people, they suckered you. Oh, they suckered you. They just said, boy, these people do not read books.
11:43They burn books. My God, could you imagine this stuff? And in any case, the dynamics shifted then.
11:50The growth rate of inventory has slowed and the supply and demand equilibrium is a little bit more
11:56condensed and smaller. So you have to really, really follow the tracker. And what we did from June 1st is
12:03that we saw the forward-looking demand get better. The growth rate of inventory slowed. The price cut
12:07firmed up just a little bit out there because a lot of people thought the second half of 2025 would
12:11have
12:11big price declines. A lot of smart people did that also too. It didn't work because the forward-looking
12:15curve got changed. Now here we want to see how meticulous has this rate move been to the demand.
12:24So I've seen a slowdown and we want to see, does that slowdown continue? Because when rates go up and
12:30things slow down, days on markets grow, inventory can grow a little bit. If there was no war,
12:37boy, the inventory growth curve would have been negative easily for a few weeks this year because
12:44the growth rate is working off high comps. Like places in Florida are seeing noticeable year-over-year
12:49declines in inventory, but they were working from an elevated level. So what I do with the tracker is
12:53give you all the variables, the whole enchilada of housing data on a weekly basis, and we are forward.
12:58We are not backwards. We're not waiting for the NER's report. We are looking out 30 to 60 days ahead
13:04on what the data is telling us today. But then we put the 10-year yield, mortgage spreads, economic
13:09equation. It's a nerd fest. It is a 24-7 nerd fest here with me always. But the tracker is
13:16here to
13:16give you what's happening today and out, not backwards. And so you get a little bit ahead of
13:22the curve out there. And that's why June 2025 was so important. I said, this is going to change. It's
13:29going to be six to nine months. A lot of people are still like, oh my god, home prices are
13:32going to
13:32crash. Home sales are going to crash and everything is still worse. And then like before the war,
13:37multi-year highs, purchase application, multi-year highs, weekly pending sales. And that's for people
13:41that read books. And don't burn them, Wheeler. That's what happens. No, that's the side we're on. We
13:49so let's talk about early on in the war, you were like, the longer it goes, the more effect it's
13:56going to have. We're what? Now week four or week five? So when do you expect to start seeing it
14:02outside of like, okay, we already see it in some of this data. We see it in purchase apps for
14:06sure
14:06because of mortgage rates, of whatever. When do you think this has a material effect on other
14:12housing data lines? So for right now, housing is somewhat insulated to this just because the
14:20spreads are better. But I mean, you're going to see a hit on demand slowly, but I'm more worried
14:25about diesel prices and food prices and countries not being able to get oil like Japan, the Philippines.
14:33I mean, these countries need oil from the Middle East. And then every day that goes by,
14:41I remember a lot, since things aren't being shipped, storage is already filled, production
14:45is down. And it just, if it goes longer and longer, it's harder to get things back. But
14:53something has to get done. And again, the fear I've always had once we get past March 21st is
14:59somebody makes a mistake and it just escalates into something worse. And if it escalates into something
15:06worse than finding a way to get it closed, all bets are off the table because it really becomes Mad
15:14Max.
15:15It really becomes, you know, for countries, you know, obviously we don't get our oil from the
15:22Middle East, but oil prices or world market prices, people don't know that. By the way,
15:28shame on all you people that think, why are we paying more gas prices? We don't get any,
15:32it's a world market price. Homies, they don't, you don't go, oh my God, the supply or whatever,
15:3920 or 40% of the supply gets hit. Well, you know, we shouldn't get, no, it doesn't work that
15:43way.
15:43But for now, as long as the 10 year yield is kind of here and the spreads are already,
15:48housing gets limited hit. But I'm just worried about the whole, like, you know, diesel prices,
15:54like, you know, diesel prices are so important. And that's, that's, that becomes problematic going
15:59out in the future. I, I still can't believe in an election year, we did this, you know,
16:04because you think about everyone's complaining on inflation and, and, and all these, and then
16:10there's this unbelievably high velocity, high volatile event that you can't really control.
16:16And that has implications on all inputs, because I'm just saying what the white house told everybody
16:22else. If energy prices go down, everything else follows it. That was the line. The whole trinity thing
16:28that we talked about November, 2024, we're like, okay, right. If this could kind of work,
16:33if oil prices go down and mortgage rates go down, because that, that those are two things that people
16:37see, uh, uh, on a daily basis, you know, of course, mortgages are, are, are only impacting certain
16:42people, but now it's like oil prices are elevated. All of a sudden the talking point that the white
16:49house had is that if oil prices fall, well, oil prices are up and everything follows it.
16:53Oh, it's getting dicey. Wheeler. It's getting, you're getting to the point that hopefully you
16:58can get a deal. And I think the, the, uh, the, uh, Macron from, from France that are good. You
17:04can't really like force your way open in, in the straighter moves. I mean, you get one or two
17:11ships blown up in that area and it's that could clog up everything out there. So that's why,
17:19that's why you haven't seen ships come in there and take tours that everybody, uh, move along guys,
17:25get on, you know, uh, uh, so hopefully we're closer to the end, but again, every day that goes by
17:33just becomes a little bit more problematic. Okay. What else are you looking at this weekend?
17:39Uh, just, just what, how, what, what are the headlines? Because as soon as the market closes,
17:43you can get crazy headlines and then, and then, uh, prep up for Sunday night trading. Cause that's
17:48what we do now, right? The nerd tour Sunday night trade. I do these Instagram lives that I'm just
17:53doing charts and I'm like, my God, I'm such a nerd. How many people really care about the 10 year
17:57yielded oil charts and everything? Everyone has fun on Instagram. I'm like, here I go.
18:02Why don't look at this technical line and everything. So Sunday nights, we get to see how
18:05whatever headline comes out, we'll see how Sunday night trading goes. Uh, and then we get ready for the
18:10next week. We rely on you to be that nerd, to watch things so we can go out there and
18:15have fun.
18:15So thank you. Thank you for taking one for the team. Madam president. If you're going to be
18:19madam president, I need a Chloe. Okay. If you don't want to play the Chloe role, I need a Chloe
18:24role.
18:24You do need a Chloe. So somebody volunteered to be Chloe said, Sarah Wheeler wants to be
18:29madam president. You know, I do not have the skillset to be Chloe. That's the problem. Uh,
18:35Logan, thanks so much for, uh, breaking this down for us, what it means, what we can expect next.
18:40Appreciate you as always. Pleasure.
18:45Pleasure.
18:46Pleasure.
18:47Pleasure.
18:49Pleasure.
18:51Pleasure.
18:51Pleasure.
18:51Light the change for you.
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