On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs report and where the labor market is heading for the rest of the year.
Related to this episode:
DOGE layoffs lead to uptick in federal jobless claims, but full impact is yet to come | HousingWire
https://www.housingwire.com/articles/jobs-report-february-2025-bls-doge-trump-federal-reserve/
Enjoy the episode!
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 stories. Hosted and produced by the HousingWire Content Studio.
Related to this episode:
DOGE layoffs lead to uptick in federal jobless claims, but full impact is yet to come | HousingWire
https://www.housingwire.com/articles/jobs-report-february-2025-bls-doge-trump-federal-reserve/
Enjoy the episode!
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 stories. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the
00:10jobs report and where the labor market is heading for the rest of the year and what
00:15that means for mortgage rates. As always, I want to thank our sponsor, Optimal Blue,
00:19for making this episode possible. Logan, welcome back to the podcast.
00:23It is wonderful to be here, Sarah Wheeler in Boise. I'm about to present in about an
00:28hour. Exciting day. It's Jobs Friday. We have a lot to talk about. And again, 2025,
00:36man, it's going to be interesting for the labor market for sure.
00:40It is. Okay, so let's recap what we learned from the jobs report this morning. This is
00:46the big jobs week, so we were looking for this.
00:49So the job openings report is going to come up next week, and that's one of the Fed's
00:54key indicators. But this report slightly missed estimates. Revisions were slightly
01:01negative. Residential construction workers flat. Right. That's something we're always
01:06going to be keeping an eye on. Traditionally, that falls before every recession.
01:10Government workers created jobs. The state overrided federal. I think everyone was on
01:15the same page that it was going to be next month that you start to see the government
01:20workers get laid off. And if everything stays constant, you're going to have lower job growth
01:29in that sense. If they start to see some retraction, that'll be a few months.
01:34I'm more interested in how the fiscal drain impacts local governments and local contractors
01:43going out in the future. But tenure yield just fell a tad and then it just shot right
01:48back up. So no real direction out there. But if you're already getting an uptick in
01:55the unemployment rate and we haven't even run through the fiscal drain and the government
02:01worker drain, then it just it's just going to get more interesting.
02:06And this is partly why I think the Fed kept that unemployment rate target at four point
02:12three percent. The reason I say that is in twenty twenty three, twenty twenty three,
02:16I believe the Fed was forecasting a recession because they had their unemployment rate target
02:19at four point six. And where we were on the unemployment rate, that kind of that kind
02:25of hit to the unemployment rate. You either get a massive, massive labor force growth
02:29or you start losing jobs. So that didn't happen. Of course, twenty twenty three was unique
02:34in the sense that the job market outperformed and the growth rate of inflation fell faster
02:40than what the Fed's model was. And that was the precipitous of them stopping
02:45the rate hike cycle. And then in twenty twenty four, when the labor market started to get
02:49softer on the revisions, they started to cut. Why, Sarah? Paper, rock, scissors, labor over
02:54inflation, labor over inflation. Yeah. And so it's oh, it's interesting because this
03:02is happening now and now we're going to see the effects.
03:04And I think Treasury Secretary Bassett said that they're sending a lot of the White House
03:11people out on because the stock market's falling and stuff. Usually that's the M.O.
03:16for Trump. He sends his people out to talk to the media. He says the economy is rolling
03:21just a bit. So I think everyone's kind of understanding that, you know, the jobs numbers
03:27are going to get a little bit soft. But it really, again, one point five to two million
03:31people get loser jobs every single month. It's a job growth. Can it override that? This
03:36is why you have you know, when a recession happens, it's really consumption and growth
03:40starts to slow and then, you know, the pull down just creates more layoffs. But last year,
03:47we were looking for one hundred forty to one hundred sixty five thousand jobs per month.
03:50We got one hundred fifty one thousand. I lowered the forecast for twenty twenty five. The low
03:57end is one hundred thirty three. So so far, the labor data is holding up, softening, not
04:02breaking. So it just it's got to get interesting the next few months. Right. Because now we
04:08get to see the full impact of everything that's going on.
04:12OK, so when we when we see the data next week, actually this week, because this is although
04:17we're recording on Friday, this will go live on Monday. What is it that the Fed is going
04:22to be looking for in that data?
04:24I think there's four things that the Fed really tracks with labor. They love the job
04:29openings data. I love the job opening data. Everyone hates the job openings.
04:35Because because a lot of people think that it's a fake number because we had 12 million
04:39job openings and that these are some of these posts aren't valid. But if you actually
04:42look at the curve of the labor market, when job opening started to slow down, quits started
04:47to slow down, higher started to slow down. It matched the BLS numbers. So we just have
04:54some cranky people on the left and right side that just don't like the job openings data.
04:58So I just kind of been trolling that for years. It was a huge part of my work in the last
05:01decade, last decade. So you didn't know me last decade, but I was like writing about
05:07job openings are going to get to six point to one million. Everybody says you're crazy.
05:11There's 96 million people unemployed. No, homie, you've never read a book in your life.
05:15You know, we don't have 96 million people out of work. So so in this context, the quits
05:22and the hires for the job openings are really front load Fed data lines. They track wage
05:28growth actually from firmed up. It's been firming up for the last few months. So we're
05:34at four percent and rule of thumb, three percent wage growth, one percent productivity, two
05:40percent inflation. The Fed's running that old model and they're probably going to stick
05:45with that. Productivity data has been good. So that that helps out with with wage growth
05:50inflation. But but I think personally, they would love to see wage growth at three percent
05:54because you people making more money. Bad, bad. You might buy more stuff. What are we
06:02going to do? And of course, when we think about the labor force growth, if it is if
06:09we're not bringing more immigration in, then in that sense, if the population growth is
06:16slowing down, labor force growth slowing down. This is the whole Dorian Gray labor market
06:20thing that we talked about post the covid-19 recovery. It's much different now than it was
06:25in previous because if the baby boomers are leaving, they have to be replaced. That's a
06:31wash. So you need population growth to pick up or labor force growth, pick up or you're
06:35just going to have a natural lower labor pool to work with. It can increase the unemployment
06:42rate if you have a higher labor force looking. But if it decreases, then something the Fed
06:48has to probably account for. If it is true, if we're getting less immigration, how does
06:54that really impact the data? Do they really want to fall 100 percent in love with the
06:58unemployment rate at that point? So a lot of nerdy technical things to look out in the
07:03future. But again, job openings, quits, hires, wage growth, the unemployment rate, the labor
07:10force data, is it picking up to me? If you're if you're pulling in the low, low 100s or sub
07:18100s, your unemployment rates will tick up and we'll see how the Fed reacts to it. We're going
07:25to have the Fed meeting soon. Waller came out yesterday and talked about, you know, he doesn't
07:30see a reason for a rate cut in March, but he does two to three rate cuts is coming in for housing
07:36and everybody in real estate. If you get one percent more rate cut, the curve of the rates
07:41can stay lower for a longer period of time to get down towards six percent in that. So there again,
07:49if we wanted to, if we really, really, really wanted to, we could lower mortgage rates. We
07:54just don't want to. So for all the people, it gets the 10 year yields at four point to four people
08:00that said no one is going to buy our debt at five percent. America's broke. God, there's just
08:06some cranky loser guys out there. And it's like it's like we haven't hit we haven't hit five
08:11percent on the 10 year since twenty twenty three. And we were supposed to like shoot up higher than
08:16that. So so I wanted to bring up. So you had you wrote an article yesterday before it came out,
08:24said here are the three things to watch wage growth in the jobs report, wage growth, job growth
08:29and hours worked. You've talked about wage growth. I think you've talked about job growth.
08:32What about hours worked? What does that mean? Is that productivity? No. To me, I think the reason
08:38why we like to keep an eye on the hours worked is that if you believe that there's softness
08:44in your business, you are going to have people work less hours. OK, so that's why people kind
08:53of keep an eye on that. So a lot of people will say we keep an eye on temp work, right,
08:58to see if that's an early indicator. But if hours worked is less and then there's a lot of people
09:05who say that you six unemployment rate is key. You six unemployment rate is eight percent.
09:09I think it's absolutely a useless data line. But a lot of people harped on that today,
09:15that the unemployment rate is really higher. I would say this. If you look at the unemployment
09:20rate for those that don't have a high school education, it went from five point two to six
09:24percent. Oh, wow. So that's big. And that thing is very volatile. I mean, it could be just labor
09:30force growth picking up or just a couple of retail sector job losses or bankruptcies.
09:37It was seven percent in August of twenty twenty four and came all the way down to five point
09:42two percent. So definitely some things we want to keep an eye on. But I think it was just kind
09:48of a ho-hum report, no clear direction, but we see internal softness, kind of the same story
09:55of last year. OK, so as always, I'm going to ask you and you've talked about a little bit,
10:00but rates. So you're saying that the Fed has indicated through different people speaking that
10:06like they're interested in two to three cuts, but not not not now, not in March. So when you think
10:12about two to three cuts, is that a whole point? I mean, each one is like, oh, it. Trust me,
10:19it helps because if you if we had one percent lower Fed funds rate, it's easier to get down
10:26to six percent and stay there. It's hard. It's hard for me to even forecast below five point
10:30seven five with the Fed funds rate here. They're doing quantitative tight and stuff like that.
10:35So the spreads, of course, have gotten better this year that helped out. But we get one percent
10:41and just I think a simple way to look at it is sixty five to seventy five percent or the 10 year
10:46yield that mortgage rates are still Fed policy. Right. You know, we had very low mortgage rates
10:52until the Fed went guns of Navarone with a super rate hike cycle. So in this context,
11:01once you get there, then this is why I always talk about like the worst in housing.
11:05We're not hiking rates. The spreads aren't bad anymore. Inventories are price growth. I always
11:10tell people price growth running too hot is bad for everyone. Every single person. It is not a
11:17good thing. This is why we did the whole team higher rates on healthy housing markets, savagely
11:22unhealthy. We need I mean, just like through a completely threw up the red flag in the housing
11:27market in February of twenty twenty two. But now it's different. Price growth is not getting out
11:33of hand. The spreads are getting better. We're in the full rate cut cycle now. You know, we're
11:41just getting to that. So the worst on that side is over. And home sales have still not breached
11:46under four million twenty twenty three and twenty twenty four. And we've had 68 percent mortgage
11:50rates. So, again, wages grow. Household formation grows. Dual household incomes. There's a guy out
11:57there that his whole thing is about like you should rent instead of buy a house. OK, he's
12:02on Netflix and anything. And I was like, homie, if you're like 40, 50, 60 and you're single and
12:06you don't have any kids and can't hold a relationship, you probably should own the
12:09house, too. Right. You know, you're so harsh. No, you should own the house. I mean, you can't
12:14hold it. You can't have a girlfriend. You can't get married. You can't have kids. You shouldn't
12:17own anything. OK, you're living a bachelor's life. So I hear you. That's kind of what I tweeted to
12:23him. You shouldn't look at all these young, educated, strong women that are buying homes
12:27more than single men because they have their together. But guys, guys, when they roll that
12:33bachelor life in their 20s and 30s and you get your 40s and 50s and you're just that lame guy at
12:38a bar, you know, trying to pick up on a girl in their 20s and trying to make yourself feel good.
12:43So they're not homeowners like America. Homeowners are people. We always say rent, date, mate,
12:49get married, have kids, dual household incomes. You buy a house, you own it. You're right.
12:56But guys like that, man, if they need to, like, plunge their toilet, you know,
13:00they can't do it themselves. They got to call their landlord. Right. So is this their.
13:06The whole rent versus housing thing, I always thought it was irrelevant because millions and
13:11millions of people buy homes. It's a lifestyle choice because you want to own something,
13:16you want to raise a family. I think single guys in their 40s, 50s and 60s. Oh, boy,
13:21when you get into your cranky 65, 75 guys who are still holding on to the three gold pieces
13:27because the world's about to break away inflation. I'm ready for it, guys. I've got my three pieces
13:33of gold, you know. So it's it's it's a little bit different on that side.
13:39That is a little bit different. I love the places we go on this podcast. We start one place. We
13:44don't always end there. We end somewhere totally different. Oh, my gosh. OK, so, you know,
13:51last week I talked to Mike Simonson about can the home can the spring home buying market be saved
13:57because getting a late start, not seeing a lot of action, you know, rates are a little bit higher
14:05than everyone would would have hoped. Like, what are your thoughts for like we're in March now?
14:09We're firmly in the peak home buying season. What are you seeing?
14:13So last year, mortgage rates actually headed up to seven and a half percent early on,
14:18and we had 14 negative weekly prints, two flat, two positive. This year,
14:22it's basically flat, three positive, three negative and two flat prints, five weeks of
14:29positive year over year growth. Trust me, it's the mother of all low bars. Take that in context.
14:35Again, rates six point six four to six percent. Housing demand grows a couple hundred thousand.
14:42OK, if you get sub six percent. Yeah, that's that. Oh, we got that. We got something going there.
14:48Duration of rates is really the key. You can't just go all the way down to six and all the same
14:54shoot right back up to say it hasn't worked three years in a row. So the question is,
14:59does the Treasury secretary, President Donald Trump and the White House economic council,
15:05do they get what they want to unfreeze the housing market by getting lower rates?
15:09So we had another governor, by the way, talk about getting rid of property taxes.
15:15Oh, I think this is this is starting to become a thing because if you get one or two or three
15:22governors talking about this and I made a video about this yesterday, you're starting to get
15:29the sense that people are questioning, hey, why am I paying so much in property taxes?
15:33Where's my money going? And now you're saying the federal government says, oh, well, why are why are
15:38we we're spending too much? Can can red state governors actually take the federal playbook
15:46and say where you're spending what's this money doing? No, no. Let's save it. That's why I thought
15:52when when Ron from Florida did that, where he talks about, you know, we need to get rid of
15:57property taxes, I was like, who's going to be next? I think it was Indiana's governor that did
16:02that. So it's something to keep an eye on. Again, I don't know how you fund your state budget if
16:09you're relying on property taxes so much. But if the federal government is cutting things off
16:17because they think they're useless, if the states take that playbook, then it's a different story.
16:24And the reason we say this is that Texas and Florida started to the migration started to slow
16:32down. OK, the inventory growth is bigger in Texas and Florida. You are probably hearing it from
16:38homeowners that my property taxes are up so much. Right. And homeowners tend to be voters. Right.
16:46So more than renters. So this is why if you're starting to see more of more of this, come on.
16:52It's how do you deal with housing inflation if mortgage rates are coming lower? Well,
16:57I mean, still, the property taxes for somebody who has, you know, two and a half, three and a
17:02half, four percent mortgage rates, they might be complaining. But the angle is where's the money
17:08going? You get homeowners and states saying, where's my I want to see where my services are
17:13being. Oh, boy, that's a whole different subject. And for red states, I could see them using that
17:20and saying, hey, listen, we're we're not getting much for this anyway. I think Houston had a
17:25completely hiring freeze on their on their city in terms of because of their budget. So this is
17:34this is just something to keep an eye on in the future, because I tell you, if Florida was able
17:40to cut property taxes, it's hard to see other red states not do something in that regards because
17:45their voters are going to be, hey, absolutely. You're not fighting for us. No, I think that's
17:51true. I think I think if there's at the national level, you're seeing this zeitgeist about
17:56efficiency. Now, you know, we can talk about is it really efficient to just go in there with a
18:00chainsaw and then you have to hire people back up. But still, the underlying thing there, the
18:05underlying idea that maybe we are just like this has gotten out of control and what are we getting
18:10for it? We want to see what that looks like. I agree that that is I mean, that's in the air.
18:15So on the Doge subject yesterday, news came out that Trump said you can't must can't fire people
18:22anymore. Right. OK, so there's two ways to look at this. Number one, he's already done bulk of the
18:28firing, so he doesn't need to do it anymore. Or it really is coming back to Republicans
18:35in states. You know, these town hall meetings don't turn out right. You know, and you get on
18:40the pressure. So I don't know which side of the coin it is, but Trump basically shut down Musk
18:52until probably a little bit later. And again, when you when you do something drastic in the
18:59sense that something that hasn't been done in a very long time, the initial impact is, you know,
19:04people are just going to all of a sudden they were working and now they're not working. So
19:08you're going to get a pushback, of course. But I'm more interested to see if the states start
19:16taking that role. Well, and I think what's interesting to me about the Florida rolling
19:22back property taxes, I you know, they have so many visitors, they have so much tourism,
19:27it feels like they could probably make that up in different ways. Sales tax. I don't know.
19:31In Texas, I'm like, OK, well, how do you do that? And maybe what you do, though,
19:35is that you cap it at a certain amount, because like, as for a long time, we had very stable
19:42home prices in Texas, we didn't have that big run up, people didn't have, you know,
19:46couldn't use their their house as an ATM machine, because it just didn't appreciate like that. It
19:50just was like, you bought a house. And when you sold it, you know, seven years later, you hope
19:53you got a little bit more. And now, you know, we've had that run up since COVID. And so I think
19:59that's where the pain is, is it especially in Texas, like, it was just that that's a new thing
20:05was like, my house is appreciating so fast. And we have these kind of very high property taxes.
20:10So there's the pain there. So I think there's some things they could do on that. But it'll
20:13be interesting to see what, you know, what the sentiment is. Let's, let's all have like a real
20:21honest conversation here. Okay, let's do it. The whole system is really rigged for housing.
20:30Right? I mean, now that you look at it, all these homeowners are sitting on tons of equity,
20:35they're, they're, they're fixed debt costs, rising wages, you know, they tend to be homeowners,
20:41prop 13 in California, right? For as for all the complaints out of, you know, nobody's ever going
20:48to like change that in terms of reversing it. Because you imagine what what happened in
20:52California, if they reverse prop 13. And everybody's Yeah, you know, everywhere is
20:58going to look so much cheaper to live in. When homeowners get grumpy, politicians tend to listen.
21:08Right when renters, not so much just because of the voting profile. So it isn't shocking to me
21:17that Florida's talking about it, getting rid of property taxes, but it is it is the domino effect
21:25is something out there because think about it, we always at least I always talk about housing is a
21:31total PITI cost, right? principal interest taxes, insurance, mortgage rates are one variable. We had
21:38a discussion, some guy was telling me that it was it was a lot more affordable to buy a home in 1980.
21:45And I was like, how do you figure and he's like, well, the median income, listen, guys, if you are
21:49using a median income to median price model, it is absolutely not worked for many years,
21:55because the rate variable has to be in it. Mortgage rates got to 18% back then.
22:00So in that context, you have to put the rate you have to put the incomes, household incomes here,
22:05how do we have near 5 million total home sales is because dual household income still I mean,
22:10I mean, if I if I had to leave everyone one thought, don't forget about the dual household
22:16incomes. And when you think about housing, if you need 103 to $110,000 to buy a house in America,
22:22nationally, you put two incomes together, there it is. That's how you have near 5 million total
22:27home sales. So and sellers that are buyers, they have equity. So it's not shocking to me that the
22:344 million level held, but that 4 million level held with rates going up and down from 6 to 8%,
22:406 to 8%. So if you get any kind of lower duration of rates staying, it's like six and a quarter for
22:48like 12 months, you can grow sales because every year, wages rise every year, household formation
22:55every year, people get married, you do household incomes, those things, you know, pile on time,
23:01right? Time doesn't stop for that. But when you're working from very, very low levels of sales,
23:08it doesn't take much to move the needle. So to Mike's and yours question, can can housing grow?
23:14Listen, last year, rates went from seven and a half percent to 6%. We had a couple 100,000. We
23:19saw that in our pending contracts data, the question is, I've only really seen the data get
23:24better from 6.6, 6.64 down towards 6%. So where are we right now today? I think we're at 6.75,
23:326.8. So we're just still above it. We're not. We're not in that category. But I mean, think
23:38about, you know, a few two months ago, people were like, oh, 8% mortgage rates, 5% 10 year.
23:44That was it. You know, I was like, you guys are really bullish on the economy.
23:49Like, you're super bullish. That's that's awesome. I'll take it. What do you mean?
23:53You can't be a higher rate, higher bond yield person unless you think the economy is going to
23:58outperform. And every year we have channels, right? The forecast all has channels because
24:03how I operate, I don't care about mortgage rates. I care about where I think the 10 year yield can
24:08move. So you take the Fed Fund policy. Are they doing quantitative tightening? What's the economy
24:13growing? What can and look what happens. The ranges are kind of here. And every year we have
24:18like a growth scare and bond yields fall and then the economy picks up on yields. That's how it's
24:23worked, Sarah, since the Peloponnesian War. And I've shown you those shows. It goes back to 3000
24:28B.C. I knew we were going to have I knew we were going to get a Peloponnesian War reference. I
24:33knew it. Just given that vibe today. Well, Logan, thank you so much for being on. Appreciate you
24:39walking us through the jobs report, but also labor and what to expect for the rest of the
24:45spring. So appreciate you. Hope you have a great event there in Boise. Yeah, it'll be fun. Love
24:50the city. It's awesome. All right. Talk soon.