Jobs preview and why the Fed is still hawkish

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about jobs week and why the Federal Reserve is still hawkish.   Related to this episode:   Why Fed President Beth Hammack wants more rate hikes  https://www.housingwire.com/articles/fed-president-beth-hammack-more-rate-hikes/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   CFPB, facing staffing constraints, moves to expand mortgage credit box  https://www.housingwire.com/articles/cfpb-mortgage-rfi-lo-comp/  Bed Bath & Beyond sets road map built around three housing pilots  https://www.housingwire.com/articles/bed-bath-homeownership-platform/  Mortgage rates drop, but is it the start of a trend?  https://www.housingwire.com/articles/mortgage-rates-dip-applications/  Why Fed President Beth Hammack wants more rate hikes  https://www.housingwire.com/articles/fed-president-beth-hammack-more-rate-hikes/  Joe Rath: Rocket Redfin integration gains momentum one year after $1.75B deal  https://www.housingwire.com/articles/rocket-redfin-integration-early-access/   Want more from Sarah? Don’t forget to subscribe!   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

00:10Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about Jobs Week and why

00:16the Federal Reserve is still hawkish. First, here's the wrap up of the top five trending

00:20stories on HousingWire.com. At the top of the list is CFPB Moves to Expand Mortgage Credit,

00:26followed by the three pilot programs rolled out by Bed Bath & Beyond in their housing roadmap.

00:32Next, we have mortgage rates drop, but is it the start of a trend? And Logan's article today on

00:38why Fed President Beth Hammock wants more rate hikes. Finally, our story on Rocket Redfin

00:43integration gains momentum one year after deal. As always, you can get a 20% discount on a

00:48subscription with the code PODCAST20 and read all of our great coverage. Logan, welcome back to the

00:54podcast. It is wonderful to be here, Sarah. I figured it out with the Federal Reserve today.

01:00Okay. Oh, what did you figure out? Tell me. It is people like you and others who have made

01:06the Federal Reserve not think about housing at all. The mortgage rate lockdown discussion

01:13is now a detriment to every mortgage person and realtor and anybody wanting to buy a house.

01:22I just watched Beth Hammock talk. And we're going to go into this because we wrote the article about

01:27her. But when Sarah Eisen, the CNBC anchor who interviewed her, said, well, what about housing?

01:35You know, because Beth wants a high grade. Policy is restrictive for housing. She's like, yeah,

01:43but it doesn't kind of matter because the mortgage rate lockdown, all these people took low rates.

01:49So, you know, she was basically saying, hey, it doesn't matter what we do. Nobody's going to give

01:56up their 3% mortgage or, you know, so we don't care. Oh, I just realized they must all think

02:04that. So,

02:06Fed staffers, I know you're all listening. You need me to get in front of Kevin Warsh to get me

02:14in

02:14front of the Federal Reserve members and explain this is not a thing. Mortgage rates just getting

02:20to 6% can grow sales. We've never had a duration curve long enough because the damn thing keeps on

02:28going above seven. You don't need the mortgage rate lockdown was a lie, right? Every single quarter,

02:34every single month, people sell their low mortgages. The total affordability data got hit very hard,

02:40but you don't need rates at three or four or five to ever grow. You just need to get at

02:46low six. It's

02:47the same thing I've been saying on CNBC for three years. But if Beth Hammock and other Federal Reserve

02:52people say, eh, it doesn't really matter. I mean, we can't do anything because nobody's going to give

02:56up their rates. The mortgage rate lockdown has now made a policy error on the Federal Reserve because

03:02they think they can't do anything. You just get policy to whatever, just close to neutral, whatever

03:07that could get you just a shorter duration of six and you can get something going. We see that with

03:13the data this year because rates didn't go above seven. So staffers, get me to Kevin Warsh, get me a

03:21Zoomie. I will correct all the bad takes that the Federal Reserve have on this subject because

03:26Beth Hammock was saying that in public in a TV interview. Lord, they must be really thinking that

03:33in private discussions. This is so interesting because, yeah, that would definitely make a

03:39difference if they're like, it doesn't matter what we do. That's not going to have, you know, it's not

03:43going to make a difference when we know that already that it's flipped as far as like people who have,

03:49there are more people with 6% rates than people with 3% rates and that that number keeps changing

03:54because people have to move and choose to buy houses every day. Okay. So I understand why

04:01mortgage people want lower rates and they think the mortgage rate lockdown discussion is helping

04:08them. No, it isn't. It's hurting you guys because if the Federal Reserve is making policy, like Kevin

04:14Warsh basically said, policy isn't restrictive for the economy not to grow, but policy is restrictive for

04:21housing. If the Federal Reserve members are saying, well, it doesn't really matter. We can't do

04:26anything because we can't get rates to 3%. No, that's not how it works. You know, so I think,

04:34I mean, I've been against the mortgage rate lockdown for like 10 years. And, you know, the second article

04:39that I wrote for Housing Wire was against the mortgage rate law because I was dealing with that in the

04:43last decade. But wow, to have a Federal Reserve member basically say that, and this is not the

04:50first one. This is like the fourth time. I'm thinking they're just thinking, there's nothing

04:54we can do. So everyone shut up about this mortgage rate lockdown thing. Just keep it out of there.

05:01Federal Reserve, you want private sector data to talk about things faster than everyone else. There is

05:07no one faster with housing data, what's really going on than the chart daddy himself. So I will

05:14offer my services to clear up any confusion. And you guys could use the tracker to get the state of

05:20the housing market. So you don't have to wait three, four months for the NAR's existing home sales

05:23report. But aha, I figured it out. This would be huge. I mean, seriously, if that's what's, if that's

05:30the mindset that's behind, like, oh, you know, it doesn't matter what we do. I mean, when Powell was the

05:35chair, we heard that quite a bit, kind of like, you know, it doesn't matter what happens to housing.

05:40You made that case over and over again. They don't care about housing. If they did, they wouldn't have

05:43done it the way they did. Well, Powell was a mortgage rate lockdown person too. At Fed press

05:48events, he would say that, well, there seems to be a lot of people who took out mortgages at very

05:54low

05:54rates and they don't want to give them up. And that, oh my God. Wow. This terrible premise has

06:01seeped itself into the people that control rates. Oh Lord. So got to clean it up. See Wheeler.

06:08This is, this is why I have to, I have to shoot this out. I did, I, I did not

06:14comprehend that maybe

06:17the entire policy division is running on this. That, whew, that'll be a change. So hopefully,

06:23hopefully I can do this and clear this up. And then the federal reserve can use the tracker data to

06:28really get an account of what's happening in housing and not use old stale data.

06:33Oh my gosh. Okay. Well we have, for once, we're not talking about the, uh, Iran conflict. We are

06:38talking about economic data. Um, you wrote an article today about it. Um, we're, we're looking

06:43forward to, um, jobs week, uh, jobs, not Friday, but jobs Thursday this week because of the short week.

06:49So tell us what you saw in today's data.

06:52So the interesting aspect, the reason I bring this up is because Beth hammock. So we said for

06:57federal reserve members, we want to see what they say, Neil Kashkari, Beth hammock, Austin Goolsbee

07:03and his smirk. And, um, Lori Logan, there's a story about Austin Goolsbee. I don't know. One day

07:10I'll say, uh, Lori Logan, uh, the, the Dallas fed, these four individuals made the conflict in oil

07:17prices, a big thing of their talking points about being restrictive. So I said, well, now that oil

07:23prices are back down, I want to see what they say. Cause I'm suspect of the oil thing being their

07:29thing. Well, Neil Kashkari said, uh, I penciled in one rate hike. Okay. So the oil thing wasn't the

07:34main, uh, pusher because he could have said, well, oil prices are down. I'm going to wait. Didn't he

07:40said one rate hike? Um, haven't heard from Austin Goolsbee or Lori Logan, but Beth hammock home

07:46girl, home girl, not only said, well, oil prices are down, but we're at full employment. And when

07:54Sarah Eisen said, but, but why, you know, oil prices are down, don't you worry about hiking?

08:00And she's like, well, oil prices are up or bad kind of, but now that they're down, people could

08:05spend more. And that's inflation. She even took it to the next level and said, well, oil prices

08:11being down now could be bad because now people will spend more. And what happens when people make

08:16more money? Sarah Wheeler, what do we always say? If people make more money and they spend the Fed

08:20goes, oh my Lord, it's inflation. Even though she was talking about like AI being the big inflation

08:26pusher and there's chip shortages and the breadth of inflation is just not the same as, as, as other

08:32hikes. So, so it is interesting. There is a way for Kevin Walsh to attack the Beth hammocks,

08:39the Lori Logans, the Neil Kashkars and Lori Logans of the world, because they're highlighting things

08:45that necessarily the Fed can't really control so much. But now that oil prices are down, she's like,

08:53oh no, no, that's, that's bad too, because people might consume more, you know, they have more

08:58disposable income. So it'll be interesting now, but her, the reason I wrote that article is that

09:06whenever the 10 year yield gets to 4% or under, it's usually because the labor data, people are

09:10worried about the economy. It's not because Fed policy really pushed us there. We haven't,

09:15we've never got to neutral policy at 3%. But the jobs data has improved from last year and the Federal

09:22Reserve are job openings people. They like it a lot. Like, like they like jobless games and job openings

09:27data. The low point was in December and it's slowly been picking up. The ADP data, very negative

09:34toward the end of the year, slowly picking up. And the BLS jobs report, slowly picking up. We had that

09:39one month that was negative and there were some one-offs and the snowstorm, snowstorm really impacted

09:44a lot of data. But now we go into this part, like what, what, what do we do? I think

09:50those hawks,

09:51the oil was just a kind of a cover on top of what they want. They want those three rate

09:57cuts

09:58last year gone because they did not want, they did not really believe in the labor market being softer

10:05or there wasn't enough pain in the labor market for them to, to take it to the next level. So

10:10it'll be interesting how jobs Friday is, but you know, Scott Besson came out and said, it'll be a good

10:15report. How does the Fed look at it now? If job openings are rising, jobless claims are low

10:21and you have, you know, uh, um, well above the Fed's break events. I got to explain the break

10:27events to people. Like I always tell people, the Fed, all they care about is like 33,000 jobs in

10:31month. If that happens, then they're completely happy. You get 70, 60 or 80. They're like hip,

10:36hip hooray. So very interesting jobs Thursday and how the 10 year yield will react because now with,

10:43you know, we wrote those articles, why aren't mortgage rates going out? It's because Fed policy

10:47shifted. We went from two to three rate cuts to rate hike. So it's a different ball game now. And

10:53the labor data really, uh, uh, matters now. So, um, speaking of Besson and, uh, Besson and his

11:00comments, I was going to ask you about that because obviously we assume that he's seen the job numbers

11:05early because he was pretty excited about what he saw. Um, how, what's the setup for, for jobs week?

11:12What is the number that they're going to be okay with?

11:15So I, I don't know if Scott had it early because Kevin Hassett said it yesterday too. He said the,

11:21I mean the, the forward looking data for the, for the jobs data has been improving, but I would say

11:27this, uh, we're, we're going to have like the world cup effect on a few reports, positive and then

11:33negative. But to me, to me, it doesn't really matter what Trump or Besson or any of them. It's what

11:39the fed thinks. And if the feds break evens are 33,000, anything above that is okay for them.

11:47Now the bond market might not, let's say you had a 40,000 print, the bond market might not think

11:52that's okay, but I just don't see these hawks because so far they haven't even blinked with

11:58oil prices down that they just don't see the deterioration in the labor report to kind of get

12:04off of this, you know, because core inflation is up. Beth Hammock did talk about core inflation is

12:09up chip shortages, AI, all this electricity costs. Boy, AI is really losing its popularity.

12:16You know, besides the fact that they told everybody, you're all going to get, lose your jobs. And you

12:21know, we're going to own the world and we're going to be so rich now electricity costs are going up,

12:26but also fed policy is AI inflationary, not the disinflation. Everybody talked about the

12:32disinflation. All these people are going to lose their jobs and incomes are going, no, it's the

12:38inflationary aspect of electricity costs and construction costs and the shortages of chips,

12:43and we need all this. So in a sense, they look at it this year as AI being inflationary, not

12:51disinflationary that a lot of people talked about early. Well, let me ask you, what do you think the

12:55jobs level is appropriate for either a rate hike or a rate cut? Well, to me, my breakevens are 78

13:02,000.

13:02So we, what we talked about last year, when, when we did that podcast and said, you know,

13:07the, there's a really good backdrop for the data to improve in 2026. What it is, is that we had

13:14a

13:14very negative curve. It wasn't just Godzilla tariffs. We shut down the government. We, we cut

13:19spending on certain, we had a whole government was just massive into the economy last year. So we had a

13:25very, very negative year in labor. In fact, if it wasn't for healthcare or social services,

13:31we would have lost 800,000 jobs last year would have been a negative year, but the curve is getting

13:37better to me. So I look at it as this, the breakevens are the key for the fed, unless they

13:42tell us it's different. If they come out in public and say, well, we think the breakevens are now

13:4878,000. Like Logan said, Logan was right. There were people looking for jobs. There wasn't all this

13:55labor not there anymore. All of a sudden we open up some closets and doors are coming out and they're

14:00running out there and doing the jobs and all of a sudden the employment goes up. So I look at

14:05it as

14:0578,000 being normal. So, but we have to take the slope of the negative data and now the positive

14:13data

14:13and we average it out. So the 12 and six and three months actually do matter. And then we'll just

14:18take

14:19it from there. But I've always thought that over 33,000 with breadth, like it's not just two sectors,

14:25breadth of the jobs, federal reserve is okay with the data. And we just kind of work it off that.

14:30And the Titanic shift from two to three rate cuts early in the year to

14:36no, no cuts to one or three hikes. That's huge. And it's, it's, it's, it's the first six months,

14:43I mean, to go in that direction. And that's probably the, the, the, the negative thing about

14:49the conflict is that the, the conflict hid the federal, the federal reserve hawks can hide around

14:54oil prices, but now oil prices are down. They're like, no spending could go up now that's

15:00inflationary. So to me, anything 78,000 above the fed is fine with because jobless claims are low.

15:08Jobless claims are heading toward 320,000. And by the way, it's going to be July, 2026.

15:13We always said, do not talk about a recession until jobless claims shoot up to 323,000 on the four

15:20week

15:20moving average. Residential construction workers lose their jobs. That's how cycles work.

15:25You know, I, I think they'll, they'll be okay with it. Now the tariff inflation, they believe is

15:31going to wind itself off. So it makes it a very interesting second half because now you're going

15:36to get some, I want to see if any of the hawks turn back to kind of doves in terms

15:42of no, no,

15:43no, no, no hikes, just being neutral because I can't imagine some of them might have been oil

15:49induced. This July meeting is going to be really good in terms of, well, I say that, I don't know

15:56if we're going to get anything out of it because a Warsh is going to change the stuff, but, uh,

16:01we need

16:01to see how many hawks and doves there are now because, uh, it becomes a good conflict. And Kevin

16:08Warsh again, Hey, homie, you need someone, you need a new Jack housing economist for a new Jack

16:14city. All right. So let me come to New York and regulate some bad thoughts out there. And you can

16:20get the tracker data. And I know cause a hundred, a hundred federal reserve people already have

16:25subscriptions to housing wire and they're, they got the tracker data. Just use that and you'll be ahead

16:30of the curve. You don't have to wait for old stale data. Okay. So what did you mean when you

16:34said

16:34you're not sure what we're going to get out of this because. Well, Kevin Warsh said he's not going to

16:38talk

16:38anymore. He said, he's not going to give a press conference. I mean, there's no more, I don't know

16:43if we're going to get the dots anymore. I don't know if we're not going to get like, I don't

16:47know

16:47if we're going to wait until 2027 to get rid of everything or are we going to get the dots?

16:52We're

16:52not, I'm not sure. Like, you know, I assumed the task force was going to tell everybody that they

16:57don't want the dots anymore. So I don't know if we're going to get that shut off, uh, in there.

17:02So we'll see. We'll see. But wow, it's going to be interesting. But I, it's, it's mortgage rate

17:09lockdown. The thing is a disaster of a conversation. It's on with the feds now using it as policy.

17:15Oh, Wheeler. Oh, I'm regretting my part in this. Wheeler, that has been a bane in strife of my

17:21existence for over 10 years, man. And it just like, just get rates down to six and look, look what

17:27happens. Literally, if we didn't have the snow storm and rates are at six and a quarter and under

17:31a couple of hundred thousand home sales, maybe the builders get better out there, but no, we just.

17:38Incredible. It's going to be a really interesting week. Okay. Of course, we're going to, um,

17:43do a podcast on Thursday that will go live on after, after we know what the jobs numbers are and

17:48it'll go

17:49live on Friday. Friday is, you know, the holiday, um, that is observed, even though it's Saturday,

17:55which is really fun. Uh, but we will be staying on top of it. So appreciate you, uh, giving us

18:00the

18:00whole look here with hammock and everybody else who's talking. Pleasure. And we're going to do our,

18:06our, our traditional July the 4th, just thrash. Absolutely. The American bears, the doomers out

18:13there. Kay Schiller home price index came out, beat estimates, you know, I mean, I I'm still,

18:18you know, I, I, I haven't, it's going to be hard for me to get my negative 0.62%

18:24home price growth.

18:26Uh, uh, uh, but we're, we're not prices aren't really breaking away, but they're not really

18:31declining. And then he's that works just kind of stuck with, which is kind of what the forecast

18:35was, but boy, you remember all those 2026. Oh, here comes the crash. We even debated one

18:44shipping lanes. Homie went to shipping lanes. Oh, that was great. Oh my Lord. I've never said

18:54anybody that thought the housing market was going to crash in one year, more than the great financial

18:58recession because of shipping lanes. Now that's whoo, whoo. Homie is smoking way too much stuff for

19:06that one. Well, Logan, thank you so much for being on. We will talk to you again soon.

19:12Thank you. And as always listen to the chart daddy, but all American bales, all American bears

19:20have failed since 1790 for a reason. And when we do that podcast, we're going to take the aggregate

19:26data of the U S economy and explain why we're always outperforming. And because there's a lot

19:31of bad thinking, usually by old men, baby boomer men. So we still have this negative thought about

19:37the U S and debt and all this stuff. So we'll go over that, but just remember it wasn't for

19:41COVID.

19:42We still have the longest economic and job expansion ever recorded in history.

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