Logan Mohtashami with the jobs Friday preview

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami to get a jobs Friday preview.   Related to this episode:   Mortgage rates have gone wild, so what’s next for housing?  https://www.housingwire.com/articles/mortgage-rates-have-gone-wild-so-whats-next-for-housing/   HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   Buy one, get one FREE tickets to the Mortgage Banking Summit on October 1st  https://events.housingwire.com/mortgage-banking-summit-2026   More info about HousingWire  https://lnk.bio/housingwire   Top 5 Trending:   FHFA says Fannie, Freddie will use one LLPA grid for FICO and VantageScore  https://www.housingwire.com/articles/fhfa-gses-one-grid/   Are 9% mortgage rates possible?  https://www.housingwire.com/articles/are-9-mortgage-rates-possible/   The ‘choice market’ arrives as sellers face growing price pressure  https://www.housingwire.com/articles/the-choice-market-arrives-as-sellers-face-growing-price-pressure/   New homes still cost less than resales in many U.S. markets  https://www.housingwire.com/articles/new-homes-cheaper-resale-market/   Rocket Mortgage will make VantageScore 4.0 its default credit model  https://www.housingwire.com/articles/rocket-mortgage-vantagescore-model/   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

00:00Welcome, everyone. I'm joined today by lead analyst Logan Motoshami to give a Jobs Friday

00:05preview. Before we dive in, here are the top five trending stories on HousingWire.com.

00:10First, we have FHFA says Fannie and Freddie will use one LLPA grid for FICO and Vantage score,

00:17followed by are 9% mortgage rates possible? Then we have the choice market arrives as

00:23sellers face growing price pressure. And new homes still cost less than existing homes in

00:29many U.S. markets. Finally, we have Rocket Mortgage will make Vantage score 4.0 its default credit

00:34model. We've got lots to talk about, Logan. Let's dive in. Yes, well, it's Jobs Week. It's Wednesday,

00:41so this is day three of Freddie Kruger's crazy neighborhood. You know, with how the bond market

00:52is, I was thinking that, you know, how is the market really pricing in the next

00:58rate hike cycle? And to me, it looks like it believes like the Fed funds rate is going to get

01:04to 5% by, you know, kind of September of 2027, which takes us almost back to the

01:14cycle highs. And that is something that, you know, when the Fed rate hike cycle started,

01:21and a lot of that is because the labor data got better first before the conflict even started. But

01:27what you just want to see is them taking the insurance rate cuts from last year back.

01:36And that means, you know, the trade war doesn't get worse and the conflict is over. But getting more

01:44than that is what the market is looking out in. And a lot of this is labor first, right? Where

01:52last

01:52year, the labor market was deteriorating enough that if it wasn't for the healthcare industry and

01:59social services, we would have lost 834,000 jobs. And that would have been, you know, the reason why

02:07the unemployment rate had gone on my premises that, you know, I, the trade war, government shutdowns,

02:14all these things, the economy doesn't perform well, because companies just don't know what to do

02:19at that point. But this year is different in the sense that, you know, we got the tax cuts,

02:26we got the expenses, we still have deficit spending, the trade war, you don't have that shock. So the

02:31labor market has rebounded. But for me personally, my break evens, break evens are the number of jobs

02:37you need to create to keep the unemployment rate, you know, stable, is around 78,000. And the last

02:43three months have been 82,000. So we've seen a pickup to where it would be normal job growth. And

02:51I think

02:51for a lot of people, they just, they see these no low numbers. And they've been constantly told that

02:57this means we're going into recession, because, you know, if we follow this, this cycle here,

03:02this cycle here, this cycle here, the recession started in 2023, four or five, that's, that's not

03:08how it works. And I always stress to people, you guys need to listen to people who track this stuff

03:13without a without a bias. So jobs week is really critical in terms of thinking where we are in the

03:20labor cycle, because the Fed is saying, hey, listen, the job market stable, we're, we're good. They even

03:26all the hawks, we always emphasize that the job market stable, stable, I can't, you know, my,

03:31our dual mandate is, is being that we can focus on inflation more than the labor market.

03:37So walk us through those numbers again, because they have changed dramatically,

03:41right, over the last 18 months, where what we used to consider good job growth, what the,

03:46what the Fed's break even is, I mean, it does seem really low. But we know you've said before,

03:51like, as if it's over some, what is it 30,000, that they'd be fine.

03:54I think the Federal Reserve, this is how I just interpret their, their talk, if they,

04:00if jobs are creating 33,000 jobs per month, then the unemployment rate should be stable.

04:06That seems extremely low to me, just because of the diffusion factor of labor, you know,

04:12people get fired every single week. We always say one and a half to 2 million people lose their jobs

04:17every month, right? That happens. It's just how the shift of, of economic growth and the need for

04:24labor. But the last three months before this report coming up, it's the three month average

04:30is 82. That's, that's fine. And, you know, the unemployment rate is 4.1%, but the jobless claims

04:36data has ticked down again to under 200,000. I cannot stress to you, you know, you and I were

04:43laughing because I was watching a video of Facebook memory of myself from 10 years ago. And I'm in a

04:49gym

04:49talking about, well, jobless claims are 245,000. And I was fighting the doomers people back then.

04:57245,000. We'd be like, what is happening right now?

05:00I mean, but even 240,000 is historically low and we're under 200,000 here. And, you know, I always

05:08tell people it's such a unique time in U.S. economic history that if it wasn't for COVID, we'd still

05:15have

05:15the longest economic and job expansion ever recorded in history. It would have been 16 years now.

05:20Such a dynamic time in economics for multiple reasons. But, you know, jobless claims is what

05:29they track and it's gone lower. Now we had the job openings report yesterday and it's the same kind

05:34of story. Job openings are still above 7 million. That's, you know, where we were pre-COVID. That was

05:40historically an all-time high before the shoot up in COVID. So I think there, the Fed is okay with

05:48job

05:49openings being there because wage growth is heading lower. Okay. So let's get down to it.

05:56If the report comes out on Friday and it's like jobs beat expectations, what does that mean for

06:03mortgage rates? I think to me it's the labor market being stable is, you know, whether it's 40,000 or

06:11140,000, I think the market is just, you know, the labor market is fine. Now, I think the

06:18big story for now for everybody in the real estate and mortgage industry is wage growth. Now there's

06:27two ways to think about this. People say, well, the labor market is hot. Well, if the labor market is

06:31hot, wage growth should be picking up. Okay. And then the other, the other group could say, well, wage

06:37growth is on the verge of breaking under 3%. And you can't necessarily have a hot labor market and have

06:45wage growth falling with the unemployment rate falling too. Okay. So you could, to me, it's a,

06:51it's a very stable marketplace, but because inflation has embedded itself longer, longer wage growth has

07:00to start picking up because the cost of living has picked up. And, you know, not a lot of people

07:06talk

07:07about it this way, but I, I'm a big believer that the federal reserve is really enjoying the fact that

07:12they're seeing wage growth decelerate to under 3% because they're running off of their own models

07:17that if wage growth is under 3% and productivity is at 1%, that's how you target 2% inflation.

07:25But everything that's happened in the last, I would say nine months, wage growth has to start

07:31picking up soon because the cost of living has started to pick up, right? It's headline inflation,

07:36core inflation, everything. So the, the last thing rates need is wage growth, start accelerating higher.

07:48And then all of a sudden the unemployment rate, you know, gets to 4% or starting to go under

07:54because then you start the federal reserve going, okay, the labor market is now accelerating.

08:00Even if the jobs reports were like 40 or 50,000, uh, if wage growth starts to accelerate higher,

08:07uh, that's what the federal reserve doesn't want to see. Why Sarah?

08:12Because if people make more money, they're going to buy more, they're going to buy more stuff.

08:19And how can you balance an economy? And I always go back to the Neil Kashkari, 2023,

08:24February of 2023, when he said, we can't have mortgage rates at 6%. How can we balance an economy

08:32if people are buying homes? Right? So it's a, it's a very, it's a very dynamic situation with

08:39the federal reserve because, you know, they, they, they're restarting a, a rate hike cycle,

08:47mostly because of two events that they've categorized as not healthy. Number one, the trade war,

08:52uh, and, but there were, they were going to let that, let that go. Uh, number two, uh, the conflict.

08:59So they talked about the conflict a lot. And even when oil prices were heading lower,

09:03they chose not to say anything about it. But, but the third variable is now AI is inflationary.

09:13And just six, seven months ago, people were talking about, oh my God, we have, we have,

09:19we're going to use millions of jobs to AI. AI has got an unemployment rate is, and what, what's my

09:25line?

09:26I'm more worried about not having enough workers, you know, then, then all of a sudden, you know,

09:33a technology displacing 47 to 52 million Americans in a very short amount of time. Um, and that,

09:42that angle has worked, right? Because guess what? The labor force growth is so low that we could have

09:4833,000 jobs per month and we'd be perfectly fine. So, uh, I, the, the AI story, and I say

09:55this because

09:56Lisa Cook, Lisa Cook, who was one of the doves, uh, who was one of the productivity doves, uh,

10:02she came out and said, well, AI right now is inflationary. So pretty much the federal reserve

10:07has flipped the switch, uh, uh, uh, or flipped the playbook from AI being a disinflationary factor

10:16to an inflationary factor because of all the money that's being spent and, and, you know, uh, uh, the

10:21jobs that are needed to keep things going. And we, we, we say that because of data centers and

10:26construction and employment is being boosted by that. So it's, it's really such a fascinating year

10:32that, I mean, I've, I've followed the markets for a very long time. This is probably the most

10:37sophisticated fed year that I can remember because we went from two to three rate cuts with all these

10:44negative variables to now we're now five or six rate hikes talking about in a very short amount of

10:52time due to multiple events, but also the kind of the misread of AI being disinflationary and the jobs

11:01being taken in private credit. I remember everyone talked about private credit was going to, you

11:06know, the economy was on the verge of a private, you know, none of these things happened in terms of

11:10the negative side, but on the positive side, but for the fed, they're looking, Hey, listen, if wage

11:15growth starts taking off, you know, we, we might even get to, we might even need to be more hawkish.

11:21So, you know, you've, you wrote, um, an article, are we more likely to, you know, what would it

11:27take to get to down to 6% again? What would it take to get to 8%? And then

11:30of course,

11:31are 9% mortgage rates possible. How do jobs fit into that whole conversation about how high things

11:38could go? Well, well, to me, it's, if, if, if the job market is, is re-accelerating in wage growth

11:45is re-accelerating, then, you know, in the future, the federal reserve probably is going to say we need

11:51to attack the labor supply. I know it's crazy to say that, but you know, uh, they, they inherently do

11:58not like a tight labor market because their old school model say, uh, and this is Beth Hammock,

12:04Beth Hammock is running the old federal reserve playbook that 5% unemployment rate is really full

12:09employment. And, you know, it might be a little bit lower for her, but, uh, in a full employment,

12:14you know, what happens is wage growth starts to take off. So I, I, I'm more about wage growth

12:20than the actual jobs created right now, because when you have, when you have such low labor force

12:25growth, you can have four to five reports a year be negative, right? And, and still have the

12:34unemployment rate low. I mean, we've had two reports so far this year that have been negative

12:39and the unemployment rate is low and jobless claims. And I think that concept is very hard

12:44for people to understand, but if you look at Japan, right, what do we always say? Japan's 40%

12:51of their population will be dead by the end of the century. And they sell more adult, uh, diapers

12:56and baby diapers. So they are an aging population. They are dying out. And Japan has never been big on

13:02immigration for thousands of years, but now they're like, Hey, anybody come on in, help us. And

13:09you, you never, you never want your, your country to have population starting dying off. It's, it's

13:16never, it's never a good thing. So you either replace it with robots or you replace it, uh, uh,

13:22with more humans replacing the people that are leaving the workforce and dying off. So, um, wage

13:27growth to me is, is, is important. Now on the negative side for the labor market, if the labor force

13:33is growing, right, we have more people working or looking for work, then the unemployment rate has

13:40the potential to pick up a little bit, but, uh, uh, ice is, you know, done, uh, is, is, has

13:46arrested a

13:47lot of people, uh, um, uh, lately. So, you know, part of the thing, I, I, I'm not sure if

13:52the White House

13:53thought this was part of their game plan, but when you reduce the labor force, uh, uh, with less

13:59immigration and, and, and, and kicking people out, that labor force growth can keep the unemployment

14:05rate low. And I don't know if that's just part of the, part of the, the thinking, but you can

14:11make

14:11a case that maybe some people in the White House thought, well, if we take these people off, you

14:16know, they need to hire more. Right. And, uh, uh, and then nothing really changes because we're just

14:22taking one group out and then replacing with another that really hasn't worked out yet. So

14:28there, there is a potential for the labor market to get better. Uh, um, but on the rate side of

14:34the equation to answer yours, it, to me, it's just a wage growth because the wage growth has been

14:38falling. Uh, we're almost under 3%. So I want to keep an eye on that, not only for this report,

14:44but for the next 12 months, because technically wage growth should start to pick up now, right?

14:49Because inflation is picking up. The unemployment rate is low. So companies have to offset, you know,

14:54the cost of living by raising wages. So we're at that stage again, another flip in this year

15:01from wage growth, decelerating to now everyone is, is expecting wage growth to pick up.

15:06I think it's such a confusing time. Um, when you think about the fact that people feel the

15:11inflation, they feel like, Oh, things are more expensive. That's bad for me. But when the economy

15:17is outperforming, that's where you get inflation. Right. So I think that it can feel like we're here,

15:22you know, if you're a consumer out there, you're like, I'm, I'm seeing all these doom

15:25headlines, consumer confidence, very low right now because they're paying more at the pump

15:29at the grocery store, whatever. It's like, so how can it be that we're in such great shape

15:33with the economy? So the consumer confidence index, if I had a piece of paper, I know,

15:41I know what you think about it and throw it away. If anybody actually like made an economic model based

15:48on the consumer confidence index, you would be the ultimate doomer of all time. I mean,

15:53the consumer confidence index is lower than the 2008 financial crisis and the, uh, lows of COVID

15:58when the unemployment rate was, Oh, it was like 18% or something for, for excuse, like it was 15

16:03%

16:04unemployment rates during COVID. But, but here, here's, here's the thing, the history of inflation

16:09for 2000 years. This is what, you know, human men, human beings, especially men do not learn.

16:15They believe they're the ones that can, you know, uh, survive an inflation surge. And what history has

16:22shown us is that no politician ever survives an inflation surge, you know? So the, the, the,

16:29the white house's a game plan, right? The Trinity or the day that the day after Trump won, I said,

16:34this, this, this can only work if oil prices are lower and mortgage rates are lower and the dollars

16:39lower. If he's got all three of those, this, this could work in a, in a two-year political cycle.

16:45So that was all here, even with the trade war, uh, boosting inflation up higher, as long as energy

16:52rates were low, then the conflict through everything, everything into straight, you know? Uh, this is why

16:58I, I, I, I just, I think to myself like, why? But then I always say this had to be

17:04planned.

17:04Years ago, there's just, there's no way you would roll the dice in a, in a midterm year. But when,

17:12when, when we went into Iran, the 10 year yield was under 4% or around there and oil prices

17:17were

17:18low. So that's when you wanted to go in. If you thought it was a four to six week thing.

17:22So of course nobody likes inflation. So all the consumer confidence index are just the worst ever.

17:27Um, but you look at nominal growth, you look at investment, um, corporate profits are up. Uh,

17:35and how I try to explain it is corporate profits are, are up. Inflation is up. Wage growth is lower.

17:42So it's not costing people and productivity is a little bit better than normal here. So that can

17:46help profits grow. Um, so as long as nominal growth investment and consumption, you could extend

17:52an economy for another 10 years, uh, and not have it. But the confidence index is what do,

17:58what do everyone see? Everyone sees gas prices every day. What do everyone see? They see mortgage

18:03rates. You know, I, I mean, the majority of the people aren't buying homes. You know, you're,

18:07you're, you're looking at only near 5 million total home sales, but when gas prices are low and mortgage

18:13rates are low, people feel better. Those two things have going into the election are, are,

18:19uh, at elevated levels compared to where they were at the end of February. So naturally you're

18:26going to, the confidence index is, is, is not good. And with diesel prices elevated and diesel,

18:32you harvest and you transport food and everything. So it's, we made it a little bit more complicated

18:41than it needed to be this year, but Sarah, I, I tell, I tell you this, this is a very,

18:48very

18:48complicated, sophisticated year in terms of like how the fed is going to work this and how the

18:53economic data is like, if you, if you were just like, if you didn't know anything and you're

18:57watching all these headlines, you're, I mean, it'd be very confusing, but, um, nominal growth is very

19:05good. And if you look at the history of the 10 year yield, the 10 year yield and nominal growth

19:10typically trend together. Uh, um, and, uh, fed chair, Kevin Warsh talked about nominal growth

19:17targeting. I thought that was a, that was a big change. Um, but you know, for, for rates,

19:23unemployment rate and wage growth, forget the headline number, whether it's 25,000 jobs gain

19:30or 150,000 or negative for 40,000. If the unemployment rate stays low and wage growth is,

19:39is, is, is, is, is not going lower anymore. And jobless claims are low. That's not, that's not

19:45good for the rate side of the story. And that's the thing that changed this year is that the

19:49unemployment rate went lower jobless claims went lower and the, uh, and wage growth, even though

19:55it's, it's, it's been slowing down is still above 3%. So all those three things, the federal reserve

20:00is like, Oh, that's stable. We're good. We're just going to focus on the other part of the dual

20:05mandate. And that's single targeting, uh, uh, inflation more than anything else.

20:11I appreciate you listing out those things for us to be paying attention to on Friday. When that

20:16report comes out, of course we will, you'll be writing about it. We will be doing a podcast about

20:20it, but Logan, thank you so much. And I'm going to see you in person because you're coming into town

20:24for our mortgage banking summit. What a week, what a week to do this. What a week. And you know,

20:31I've, I've, I've, I've had to, I've had to change all my presentations, uh, uh, from where we were.

20:36And, uh, it is, it has been, it's been so fascinating watching this year and how things really flip the

20:44switch for multiple reasons. It isn't just oil prices. And, uh, you know, I like, like I've talked

20:50about oil was $112 in April 7th and you know, uh, the 10 year yield was at four 30. So

20:58the highest

20:58levels of oil, the 10 year yield was almost 1% lower. Uh, but there are other things that are

21:04in play. And I think the, the breadth of talking about it all is, is complicated, but that's what

21:10we're here for. We're here to try to explain the madness. I love it. Well, thank you so much.

21:15Uh, safe flight into Dallas and we'll talk soon. Pleasure. See you soon, Sarah.

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