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00:00Welcome, everyone. My guest today is lead analyst, Logan Motoshami, to talk about Jobs
00:10Week and tariffs and all the other variables that can affect mortgage rates as we head
00:15into spring home buying season. Logan, welcome back to the podcast.
00:19It is. What are you smirking about?
00:22It was what you were doing with your hair before we got on, actually.
00:26You find that funny? Yes. Okay. We have a lot to talk about, man.
00:33Crazy stuff. Let's start with tariffs. Okay. So first, before we go into this conversation,
00:43if I really thought we were going to have a major tariff policy, and this is what I
00:50thought back in 2016, there is no negotiation on tariffs. You simply implement the tariffs
00:58as soon as possible, and you need to keep them at least 4 to 12 years because you have
01:06to change behavior, companies and everything. I mean, you need years and years of tariffs
01:12because what's going to happen is other countries are going to tariff back on you and you need
01:16to adjust to that as well. So what's happening this morning, this is Friday morning, Trump
01:23has gone from 25% tariffs to Colombia, to no tariffs, to 2.5% tariffs, to 25% tariffs
01:29to Canada and Mexico, whatever it is. If I took it seriously, you just simply have the
01:35tariffs and you don't do anything. There's no negotiation. This is why I always say that
01:40people have to be careful about the trade war tap dance. That's how I call it. Back
01:44then I called it tap dance, now I call it a tap dance. So the question, and we brought
01:49this up, I think a few weeks ago, that if people start calling a bluff with President
01:57Trump's personality, he's probably just going to go do it just because he doesn't like to
02:01be called out. So at some point, he's going to need to actually do the tariffs and have
02:07it stick. Or everyone's going to realize, I mean, Sarah, how did the Spartans eventually
02:13die off?
02:14I don't know the answer.
02:16You don't know. But eventually people caught on to their fighting tactics and found ways
02:22to go around it. Right. So if you're doing the same game plan and the market's kind of
02:27not okay, you know, because I felt like today is like the tariff talk became like infrastructure
02:34week vibes. Remember infrastructure week, we're all supposed to get infrastructure week.
02:38Oh my God, here it comes. Like if Godzilla came and destroyed a city, then that's infrastructure
02:43week. Right. Because you're going to get, you know, construction being done. But it'll
02:49be interesting because by the time this comes out, it's Monday morning. We'll see. But I'm
02:54at the point to where President Trump needs to actually start putting a tariff on and
02:59have it stick or else we're just going to be this trade war tap dance again. And we
03:05fall back to the, you know, 100% population in America, 336 million people, 162 million
03:13of them are, you know, 48, 49% of people are workers, but 100% is net consumers.
03:20So this is one of the reasons why I didn't believe we'd get in a major trade war back
03:24in 2018-19. The economies are much different now. This is not the 1890s or 1910. You're
03:29not going to get rid of income tax and replace it with a tariff tax, which the percentage
03:36of GDP on something like this is just not, you can't use those two periods of time. So
03:41we'll see. But I'm at the point where I think, you know, you're going to have to do something
03:47because you don't want to be called a bluff all the time because you start to lose your
03:52negotiating power. So we'll see what happens on Monday. But that's, that's the vibe I got
03:59this morning on Friday.
04:00So on Friday morning, what we're seeing is a lot of conversation taking Trump to task
04:05or seeing like, oh, he's not serious or, oh, this isn't going to happen. So that's what
04:10I'm trying to figure out, like, what's prompting this on your side?
04:13Yeah, there's just, there's just this talk market back and forth. You know, it's just
04:19kind of all over the place. Like, like, realistically, if you really were a tariff person, you simply
04:25implement them and you're not budging because you need years and years of years of behavior
04:32changes from not only domestic, but international. And that's how it works, right? You can't
04:38be, this is a negotiation tactic. It works on the uninitiated, but we are the initiated.
04:47And you remember, you have to play the person. And if you're doing the same playbook, you
04:52know, the markets are going to be kind of, and we always remember this because in 2018,
04:5619, what happened was the stock market would fall. They bring out Larry Kudlow or somebody
05:00and he's, oh, we have talks with China. We can't have that kind of process. You're either
05:04in or you're out, right? You had six tariffs and then say, all you companies have to deal
05:09with it. Consumers, you have to deal with it, whatever it is, this is it and move on
05:13with it. And then, you know, you could focus on what, you know, the back and forth stuff.
05:18So that's why I think he's going to have to actually do something or else it's just
05:23all a negotiation play back and forth, which I've always, I always thought it was, you
05:27know, because he never, there wasn't no flat. We're going to do this, get ready for the
05:32next four years. This is how it's going to be. There's no negotiation there. Then you
05:36got, okay, serious. And then you have to do all these other things around it. So we'll
05:40see what happens on Monday.
05:42We will see. Okay. Also, this airs on Monday. It's going to be jobs week.
05:46Yes. And we sit here today. I love it. PCE inflation day. Yesterday on Thursday was the
05:54quarterly GDP PCE data, two handles. But here we are three, six, 12 month PCE, two handles
06:05everywhere around. So I, I put up a chart where I showed the growth rate of PCE and
06:13it's like the peak was 7%. And then it had a, Oh my God, the inflationary aspects of
06:18a global pandemic is going five to 600 years. And you know what? It was really, really bad
06:24back in the old days. I mean, how life was on the docks and how bad it's, I mean, it's
06:29just, in any case, the disinflation happens from global pandemics. And that was always
06:35the concern, especially for housing, that the Fed was going to be very, very aggressive.
06:38Like for me, I stick, stick to my guns here. I would have stopped at 4% because the forward
06:44looking forecast of yours would have matched your PC. This is why I knew somebody spiked
06:48the Fed's eggnog in, in 2022, because all of a sudden they changed, they flipped the
06:54books. I was like, Oh my, they're going to the old aggressive model right here. So that's
06:59not going to be good for housing because a lot of people are going to think, well, the
07:01growth rate of inflation and mortgage rates are going to be sub 6%. The builders are like,
07:06Hey guys, we're up here at 2019 sales levels. Oh, existing home sales. You can't do that.
07:10You know? So that was always a concern. And it's, it's 2025. It's stuck the entire way
07:17because labor overinflation, because of jobless claims were running toward 300,000 whole different
07:22story. They flinch, you know and the bond market flinches too. Two times we've had rates
07:29fall when there was an economic scare or the labor market is perceived to be, but even
07:34softness in the labor market, not good enough breaking. Oh my jobless claims rise at all.
07:43So we're getting there.
07:45So what do you expect to see this week? We, so you've laid out the case for like, they're
07:49not doing anything until it breaks. Do you think we just see another slow, like, Oh,
07:53we're heading towards more jobless claims?
07:56You know, the jobless claims data is still very good. So that's, that's not the issue.
08:02But again, the private payroll data has been slowing down because it's been primarily driven
08:08by government and healthcare service. Okay. So healthcare service, we all know we're older
08:13and you know, there needs to be a demand there. I get this question all the time. I'm going
08:20to address it again. What if Musk just fires a bunch of federal workers, right? Government
08:27payrolls were one of the reasons why the headline numbers that would, in a sense, slow the payroll
08:34number down and down because manufacturing was lost back in 2024. It wasn't like a huge
08:40decline. I think it was like 82,000 or 87,000. If you lower the total job growth data and
08:48you know, you have more people working the unemployment rate increases. The question is
08:53now, is it population growth is slowing down? Obviously it is. Are we going to have that labor
09:00force pick up where the unemployment rate keeps on rising or is this authentic? Well, guess what?
09:05We're starting to lose job. Jobless claims start to pick up, which will be the case with government
09:10workers, just like it would be for construction and manufacturing. And then you put them all
09:13together, claims rise. That in theory would be 10-year yield would fall down in that.
09:19I hate having that conversation because you're basically advocating for a government official
09:26to fire people from their jobs, right? These are households. These people have children,
09:30you know. They have their lives, you know. But I get that question because so much of the job
09:37growth was government last year. Private payroll, keep an eye on that and then keep an eye on as
09:43we always say, residential construction workers. Because historically what happens is when this
09:49data line starts to fade, the Fed tends to ignore it, right? So the question is, is this going to
09:55be another cycle, another notch on their belt? Do you ever see the movie Gangs of New York?
10:02Yeah. Yes.
10:03Yes. You remember the guy with the bat and he had notches on his bat? That's why I think about the
10:08Fed in economic cycles with that. Is this going to be another notch on the Fed's bat where they
10:14go, oh, residential construction workers are losing their jobs, but the general economy is
10:18moving fine so we need to, you know. Bowman, who's the most hawkish Fed member, she came out and
10:24said, oh, there's no tight policy out there. Look, the stock market is up. The job market is great.
10:30What do we, this is not restrictive policy and then like everyone's throwing eggs and everything
10:36but again, labor over inflation, right? That was always the key. So we have triggers. I'm trying
10:43to teach people triggers. I always say it's the cheat code. Construction labor is always a cheat
10:47code here and the wild card for 2025. So we're off and going, right? 2024 is all done. Here we are
10:54the first month and we'll see how it flies. We know that we won't have those jobs. If we lose
11:03government jobs, it won't be in this report, right? I mean, that hasn't even started happening.
11:06No, that hasn't happened. Again, job openings is critical because the Fed likes it,
11:13right? And the hires of job openings data has really, really fallen. The quits have really
11:20fallen from the peak. The job openings itself has fallen. The ECI wage index, the component of the
11:26Fed tracks, that came out today too and is showing the deceleration of wage growth as well. So
11:32remember, wages are... The Fed keeps on saying, we don't really target... Yes, you do. Stop lying.
11:38Come on. Okay. So the ECI wage. So if the quits data keeps on falling, the hires keep on falling,
11:44it becomes a little bit more of the... Everything is narrowing down. And what Powell said is his
11:50own words. If you have a job, it's great. If you're looking for a job, eh. And I'm like,
11:58okay. I didn't... Keep on making me look good, homie. Keep it up, right? You guys are just
12:07awesome. Just stick right in the line. That's why we have to look at job openings and the
12:13subcomponents of it. Because again, we're not firing a huge amount of people, right? The Fed's
12:19like, we're not firing. If we were, we'd change. By the time that happens, Sarah, it's a little
12:24bit too late. But the jobless claims data, we always put it in part of the tracker for everybody
12:31to get versed with it. And then Jobs Friday. And again, one of the things that the Fed was actually
12:37not encouraged about the last few months of 2024 was that wage growth was picking up again.
12:42We're heading down to 3%. And all of a sudden, that stopped. They're like, whoa, whoa. That can't
12:48happen. No, no, no. You people think you can make that kind of wages? No. Make our lives difficult.
12:56Then you're going to buy a house and then you're going to have kids and you're going to buy more
13:00stuff. That's inflationary. So wage growth, keep an eye on it. The Fed's old model is 3%
13:05wage growth, 1% productivity. Productivity has done so good. I just don't believe it. The Fed
13:11doesn't believe it either. If it happens, it's like the miracle of the US. It would be like
13:16the biggest story this century if we really have authentic productivity gains and it flushes out.
13:20Because right now you would need like 4.7% or higher wage growth to be inflationary on their
13:26models. Productivity has been much better than anybody thought. So we'll see. Again, Jobs Week,
13:34some of the wildest moves we've seen in the 10-year yield of mortgage rates comes off the
13:38Jobs Week. Sometimes it's nothing but boring. So we'll see. And again, 10-year yield peak
13:44forecast for 2025 was 4.7%, 7.25% mortgage rates was the peak. Those are in play. Now we went above
13:514.7% for a little bit for a few days. But again, when we're at that level, you're just going to
13:56need stronger economic data, more inflation, stuff like that to warrant people to sell bonds and not
14:02buy it. And that's why we do channels. Go look at that five-year of the 10-year yield. We don't
14:06target mortgage rates, but we target channels. It's the same thing I did in the last decade.
14:11Let's talk about bond yields a little bit because from a news perspective,
14:16the short amount of time that Trump has been in office since the inauguration has been
14:21filled with news, sometimes conflicting. We're still trying to figure out what the
14:27funding freeze and then the recession, the rescission of the funding freeze. And then,
14:30no, it's just the rescission of a memo, not what's in the memo. All of these things are
14:36very confusing from a news perspective. From a bond market perspective, how has it been since
14:41he's been president? How is the bond market reacting? When you, in theory, have less
14:48government spending, that's less money into the economy. One of the reasons a lot of people would
14:55say a lot of middle-aged men podcast stock traders who got the recession and stock market crash
15:04wrongs, some people would say they're not versed with fiscal dominance where the deficits are
15:11very high in a sense that the economy has an extra kick in there. I would always argue that
15:17this is something I wrote six years ago. 2024 and on, you just have so much mandatory payouts
15:24because we have so many people 65 and over now that you're going to have a natural deficit curve
15:30that's going to be higher. I wrote that article in 2019, like $71 trillion in federal debt by
15:352016. The 10-year yield is still here. Everyone knows this. You can model this out. It's not like
15:39the bond market wouldn't know this. So here we are at four, I think the last thing I saw was like
15:44451 on the 10-year yield. We just had an inflation surge from pandemic. We have all this government
15:49spending. The bond yields are pretty much below what they were in the 1990s. So there is no
15:55vigilantes or anything like this. If you really were a broke company or a broke country,
16:0210-year yield would be shooting. Go look at Russia's 10-year yield. Go look at Turkey when
16:07they had to deal with that. We're not those economies or that small of a country. So money
16:14went into bonds, but the economic data will flow the 10-year yield. If there is anything really
16:21huge, like a high velocity, it would actually be a negative. But there's just so much of the
16:29spending is mandatory payouts out there. And there's all these chip hacks and everything
16:35that we've done, and that filters into the construction data or manufacturing data. But
16:41there's a lot of government spending, some of it where it doesn't matter who the president is.
16:46You literally have – this is why we do the Logan's Run. If you did the Logan's Run not at age 20,
16:51it was a bit extreme for the book, 33 for the movie. Your housing story is dead, by the way,
16:56if that was the case. But if you did a Logan's Run at 65 and everyone died at 65, the mandatory
17:02payouts would all go away. So the deficit would fall naturally. Of course, your economy would fall
17:06because you don't have workers or consumers. But the 10-year yield will really revolve around
17:13economic data or if it gets a slight, oh my God, the city economic surprise index is beating. Oh,
17:19no, it's missing. The economy is getting weaker. 10-year yield moves off that. That's why we do
17:23channels. It happened in the last decade, 1.6 to 3. That was the forecast every year,
17:29ranging in there mostly. And then here, 3.80 to 4.70, the last two years, that's been the case.
17:37So we'll take the economic data over government spending all the time.
17:42Well, and I ask because we are now officially in February when this comes out. So spring home
17:50buying season, this is it. We're ramping up. And I feel like the mortgage rates we have now are
17:55kind of the mortgage rates we're going to have. Do you see anything significant happening to make
18:00them better? Whenever economic data gets weaker, mortgage rates get better. I mean, it's just-
18:05I know, but I mean, the economic data you're talking about-
18:08I mean, the thing is that when we do ebbs and flows with data, it's like,
18:13why do we see channels all the time? Well, the economic data gets better. It's a higher bar to
18:17beat. And then rates go up. Rates might impact that. And all of a sudden, economic data gets
18:22weaker. It's the flow of data and how the 10-year yield works off of it. This is why I detest
18:30mortgage rate targeting. And like 10-year yield targets, you do ranges. You stay in the range
18:36because nothing stays static. You just have to protect the edges of your ranges, right?
18:41Anything above 470, you really need data. The Hoarder line, that's why we created the Hoarder.
18:45I know you people think I say it wrong. I'm going to keep on saying it wrong.
18:48You do say it wrong.
18:48I'm going to say it for the rest of my life. So you all got to get over that.
18:52The Hoarder line was there because, well, we broke it, but all of a sudden,
18:56economic data got better and there was a lower bar. So the flow of data moves the 10-year yield
19:01and rates. The difference now is that the spreads are much better now than they were in 2023. So
19:06the volatility is really compressing down on rates where you don't see too much movement.
19:12So again, one or two bad reports, money flows into the 10-year. We've seen this happen,
19:19right? We can't be stuck in the, oh, it's going to be this rate the whole year. And then all of a
19:23sudden, what happened last year, the labor data started to get softer, revisions, everything,
19:2810-year yield went down. All of a sudden, we went from a point where nobody's going to buy
19:32the 10-year yield at 5% because we're broke to within months, we're at 3.62. Oh, the recession's
19:38here and ebbs and flows. You just got to learn how to track the economic. I know it's not for
19:42everyone, but the chart daddy says it's for me. Let me cook. Let me do what I do best.
19:48The Instagram family, we're trying to get that to a million people a month.
19:51Those stories, those charts, as you could all see, I don't have much of a life. I'm literally
19:57doing this even in 12 o'clock at night. Look at the 10-year yield trading at this and that. So
20:02work off the economic data more than other things. I know government spending,
20:08are they going to fire workers? And that explains late 2022, early 2023, all of 2023,
20:162024, and where we are right now in 2025. Okay. So basically,
20:21people just have to keep looking at the tracker. Keep looking at the tracker. And again, always
20:27think of the wildcard for 2025 is going to be construction workers, residential construction
20:33workers, not so much remodelers, but apartment workers are at risk. There was a really
20:39interesting talk I had with a market participant about, they're like, well, what about new home
20:45sales? And I said, new home sales crashed in 2022. The builders made a labor market adjustment
20:55then. They actually laid off people. They haven't really come back. Then mortgage purchase application
21:01data for the builders is actually still positive year over year. For all this talk, if it was
21:06straight negative, it's a whole different story. Then the cancellation rates and all these things
21:10happen. Then you have a more fluid backdrop for labor to really be taken out on single family.
21:16Apartments are more at risk because it's taken two years to finish them. And now they're finishing
21:21them and they're like, wait, permits are back there again? What? You mean you got no work for me?
21:28So a different backdrop when you take single family and apartments, think apartments first,
21:33and always think Texas and Florida, right? Everybody said ground zero was Boise,
21:38which we're going to Boise in a week. And we're going to be in Boise twice within the next six
21:44weeks. That wasn't ground zero. That wasn't ground zero. But Florida and Texas make a little
21:51bit more sense because inventory is rising for the existing home sales market and the new home
21:56sales market. And then if you really wanted to see labor weakness, you'd see it in those two states
22:01first. We talked about, I asked you about, well, what about deportations? How's that going to
22:07affect construction workers? So far, we've seen pretty small efforts there and not specifically
22:14on construction workers. I think there've been some factories, some different things. So we
22:18haven't seen any effect of that yet, if we're going to at all. I've always will say the same
22:25thing here. We have deportation numbers every single year. And miraculously, somehow, the
22:33builders find a way to build homes when the new home sales data grows. This happened in the last
22:40decade because in the last decade, there was a lot of people leaving the residential because the
22:45housing bubble crash really crashed construction. And the builders were complaining about labor
22:51throughout the entire decade. But when new home sales grows, oh my God, we finished projects.
22:56So if there was a case, you're going to start to see builders say, I have 59% of my crew not here
23:05because they're afraid they're going to get deported. We can't close this transit. We can't
23:11close this project until another four to five months out. Something like that where the turn
23:15times would actually be adjusted to the labor. You'll see that when people start raising their
23:20turn times for builders. But I'm telling you, if mortgage rates went down to three and a half
23:28percent, the builders are building homes. Somehow, they're going to find labor and they're going to
23:30get stuff done. So that whole labor construction thing, be mindful of it, but you're going to see
23:37the turn times be going first, then you could go into this. And that assumes that the builders
23:42cannot find any other employment or workers in that front. Then we could go into that discussion
23:48out there. But I don't like hypotheticals where the variables are questionable with the timing
23:55of a cycle. I have to live minute by minute, day to day. We run a quarter mile of whatever the
24:02Fast and Furious line was. Work off of that first. Then trust me, if that was an issue,
24:09it would be so prevalent in the data and people would see it. Builders would say,
24:15half my crew is gone. I can't find, we're not there yet. When we get to that spot,
24:19we'll address it. But until then, I'm not, the political, I, I, politics.
24:29Okay. What else, what else should people be paying attention to?
24:32So by the time Monday's out, everybody's read the tracker that has access to the tracker. We
24:37want to see again where pending contracts are doing. Purchase application data, two positive
24:42weeks, one flat week on a week to week basis. There's, there's nothing really big happening
24:47there. Not on the negative side or the positive side, but it is technically still positive.
24:52That's a forward looking indicator. It's the seasonality of, of housing demand too.
24:55So we're keeping an eye on that because usually February is the month, the last two years that
25:00the data falls noticeably because rates are higher. So this is why we're going to really
25:05keep focused on February. Why? By the time the economic summit is in Dallas, Texas,
25:10you know, not only I'm going to be there, Mike Simonson, we had a host of economists,
25:16Daryl from Redfin, Jessica from NAR, Lisa from Blight, Barry Habib. We have a ton of other
25:21mortgage and political people talking that day. But by the time February comes, we're going to
25:27see the data. And again, I'm new listings data should get over 80,000 during the peak seasonal
25:32months, peak seasonal months. That, that should be the case. Inventory should grow as long as
25:37rates stay elevated, right? Inventory should grow the supply and demand equilibrium. I'm,
25:41I'm one of the lower price forecast people for 2025. That works itself out. The velocity isn't
25:47really fast, but by the time February, the end of February, we have a really good idea.
25:52And remember we are months ahead of everyone by the time our data right now, you're going to see
25:56it, you know, in April and some of the sales reports, these pending contracts go sign. It
26:01takes 30, sometimes even 65, 70 days by the time it gets a final sold. And then we work off of
26:08that. That's why the tracker is designed to be today. Look tomorrow, not in the past.
26:14Love it. Okay. I'm going to wrap up with that. Thank you so much,
26:17Logan, as always. We'll talk to you again soon.
26:19Pleasure, Sarah.