On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about what to expect this week from big tariff announcements and jobs data.
Related to this episode:
Tariffs | HousingWire
https://www.housingwire.com/tag/tariffs/
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:
Tariffs | HousingWire
https://www.housingwire.com/tag/tariffs/
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 collision of big tariff announcements and Jobs Week. I want to thank our sponsor, Optimal Blue, for making this episode possible. Logan, welcome back to the podcast.
00:21What a wonderful Friday morning this is. We have lots of drama, and I myself is an agent of chaos as well, so I kind of live for these kind of days. So it has been a lot of fun. Good for the bond market, good for lower mortgage rates, but today was one of those crazy days with data and stocks are selling off.
00:42We've got Liberation Day coming up, Jobs Week coming up. There's so much happening over the next week that it's a wonderful time to be alive in America.
00:53I'm so glad you're enthusiastic about this. Okay, we're recording this on Friday, and this will go live on Monday, which will be the 31st. And then we'll have just in a few days on Wednesday, we're going to have, quote unquote, Liberation Day, which is all about tariffs. But we have so much happening next week as well. So do you want to do tariffs first?
01:13Let's do tariff on, and then we'll take tariff off after. How about that? Okay, so it's Friday morning. The inflation data, the PCE inflation report came out today, a smidge higher than estimates, but this was highly anticipated to be a little bit hotter inflation report. So not too much of a surprise there.
01:37But the economic data wasn't good. The consumption data wasn't as strong as people thought. The income data was okay, but if the growth rate of inflation is higher, real rages growth, we're getting to a tricky stage here. So the 10-year yield fell. And then, of course, here's the thing that we have to start thinking about going out in the future.
02:01Let's assume, let's assume that the tariffs on cars, I know some of it is like a funky percentage on certain things, but let's assume that we have 25% on tariffs on cars, everything. So President Trump last night said, auto industry, you better not raise prices on consumers. I'll be mad. So I thought of like the Twilight Zone, little kid, bad, bad, bad man.
02:28You know, so why would he do that? Because it's starting to creep in to a lot of expectations of the economy this year. I don't really take survey data too seriously, but it's like, if you look at the Michigan survey, it's like the worst, like, you know, people are worried about their jobs. Inflation is taking off. It's not what you want to see. And it's at very high levels too.
02:54So Trump tried to tell the auto companies not to do this. If we get tariffs, don't raise prices. But if they do raise prices and it sticks for about, let's say, three to four months, I'm assuming that the Federal Reserve is going to raise its inflation expectations one more time.
03:12It's one thing in 2018 and 19 where you're doing this trade war tap dance on, you know, small items, not a big percentage. You get into the cars, it's, you know, people are saying it's an extra three, four, some even have 6,500. Well, the problem is, it's not like rates are down so much to offset car loans as well. So you're dealing with things that, you know, you got to be mindful of it right now.
03:39So the question is, are we going to get a tariff off on Sunday or on April 1st? I'm not going to believe anything that happens on April 1st. So everyone be mindful. Don't get tricked about that. They moved it from April 1st to April 2nd, thankfully. So I thought that was a funny joke.
03:54But the president just had a talk with Mark Carney, basically Canada, saying America is not a reliable partner anymore. So we'll see how the next 48 to 72 hours. But bond yields are falling, right? And you're starting to get to a situation that you have to now make the case that the economy starts to get better with tariffs, which it's not really designed to have like that quick positive impact.
04:23You know, one of the reasons I don't believe that anybody believes in tariffs really is because you simply put it in place. You keep it there for like 15 to 20 years and the whole thing changes over time. So now you're starting to see stocks sell off, bonds, bond yields go down, mortgage rates are going a little bit lower today.
04:42So you're now getting into a little bit more of a tricky stage because we're going into April now. And, you know, you can't just say the ex-economy was a former president. When you start to get into Q3 and Q4 and you put all these policies in place and you fire federal workers, you know, that's your fingerprint.
05:01So it now becomes a political game. I think the White House took off one of its U.N. ambassadors because they're a little bit worried about the House. And this is the problem with making big changes. The political cycle is really two years and it becomes harder if you lose people in the House and Senate because of what people are feeling in the economy now.
05:25OK, so unpack a little bit for me. When you say the inflation, the Fed might have to change its inflation target. What does that mean to the normal person out there? Does that change the rate? What does that mean?
05:36Well, here's the thing. The Fed raised its inflation targets for the year, and yet the 10-year yield and mortgage rates have gone down because the people perceive the... Sarah, what is this? What are we talking about? Boom, boom, boom! Labor over inflation, right? And the bond market believes that if it came to it, you know, everyone's going to flinch.
05:59And bond yields go down, mortgage rates go down, the economy gets weaker, labor over inflation. So the Federal Reserve took its what we believe we're going to get to, you know, 2.1 percent or something. They raise it to 2.7. Well, if you have like four months of a one-time price adjustment on goods with cars, you could probably see the Fed raise their inflation expectations a few months out from now as well if this continues.
06:23So then you start to get in a, well, back and forth game, right? So it's fascinating because now we're getting to that area, right? You either got to commit to it or you don't commit to it. But when you go into the trade war tap dance early and people start calling your bluff, you're going to... See, this is the thing about at this stage, he's going to have to do something or people are just going to say it's all for show.
06:49And if it's something he really wanted, then he wouldn't care. But if that's something he doesn't want, really, you get into the era where the Federal Reserve and policy can maybe make it unforced error that they don't want.
07:04This is why it gets a little bit more tricky for even the Fed now, because they've said, well, if we raise rates into something like this, it's recessionary. But so it's just a more crazier time in this sense, because you can see it in the public surveys, like people's inflation expectations are skyrocketing, people's fear of their jobs losing.
07:25There was a talk about how many people they look like they want to fire from the federal workers. It's about 800,000 people. That's the case is what we've talked about. You're going to get the unemployment rate to rise just based off of that if the labor force growth stays the same. So, so much is happening. But the response is tenure yield goes down, not up, right? And mortgage rates a little bit lower today.
07:49I think your point about what you've said all along is like, you know, the White House wants lower rates. We all want lower mortgage rates for sure. And part of that is to offset the, you know, what might be cost more because of tariffs. But as you said, like, at what point is that offset? How much, how much do mortgage rates have to fall or rates have to fall to offset tariffs at this point?
08:11When we think about tariffs for housing, it's really the builders. Again, lumber prices were $1,000 higher during COVID, yet mortgage rates were at 3%. So the Federal Reserve is not obviously doesn't care about the existing home sales market, but the labor market is their is their concern. And if rates stay elevated or grow higher with tariff costs, the builders profit margin goes down. And, you know, it gets more difficult.
08:41We always talk about construction labor is a recession indicator. So you see the complexity now with adding these variables into the equation rather than just like having things be normal. You are people are prone to make more mistakes when there's chaos, right?
08:58Because sometimes you don't know how somebody is going to react or, you know, is this something you really wanted? But for the builders, you could see why the builders wrote that letter. Please, please give us an exemption out here and we'll see. We'll see what because the builders are kind of right on that margin of completed units for sale.
09:17And what this means is that there's no permits aren't going to go off anytime soon in any matter. So that's something we addressed in the last podcast. But now you could see this, that if there is going to be economic weakness for this, the 10 year yield has gone lower. I'm pretty sure the White House probably would love to have mortgage rates in the fives right now, because with all this headline news, if people are buying homes, they feel better.
09:41If there is car inflation in terms of, let's say, $5,000 additional across, well, if car loans rates come down, you could offset it. You could see why they want lower rates. But here it's just we're not there. We're not there on the rate side. We're not there on the Fed side. And who knows what they're trying to do in terms of getting any kind of access with the Federal Reserve on terms of maybe trying to get somebody to lower rates there.
10:08But it starts to all make sense right after the day of the election when Mnuchin said, we would like to have a cap on the 10 year yield. If this game plan is going into fruition and goes on more, it just gets more chaotic with the data. But for now, the 10 year yield has gone lower. The GDP, the Atlanta GDP is negative 2.8%. But if you make some trade adjustments, it's actually slightly negative.
10:35So even with the trade adjustments, we are now slightly negative on GDP. You can make a case that the second quarter you get a rebound in demand because of weather. However, we didn't see that in the report today. And that's one of the reasons why the 10 year yield is down. Stocks are down. So we had this in 2018 and 19, a lot of market friction over this.
10:58And it is interesting that the oil industry says, we're not building any more wells unless you get oil prices up here. So chaos, Sarah, agents of chaos. I'm grinning. I'm happy. This is kind of my world where I like to operate in. But for the American consumer, you could see why these surveys aren't really like, hey, what's all this stuff?
11:23At what point, I know you don't like surveys, but you've noted that across the board, we're seeing that consumer sentiment get hit. At what point does that start to hit in the housing industry? So you're already coming off a couple of years where people are like, oh, I wonder if rates are high relative to where they were. I'm trying to wait, whatever. At what point do you see that measurable in the housing context?
11:47Surveys, to me, housing surveys are somewhat useless because it's the rate factor actually matters more. So here's a really good example. The public surveys on the economy have soured. And yet purchase application data is better this year. Why? Because rates are lower. Now, if mortgage rates were higher and purchase application data was better, you'd be like, what's that about? Okay. But I'm assuming that if rates, if mortgage rates were higher, you'd be like, what's that about?
12:17If rates had gone up to 7.75, let's say we didn't have that peak around January 14th, I'm pretty sure the data wouldn't look like it did this year. But the thing is, rates went down. So even with all this negative survey, it's a little bit better demand than last year on the weekly data.
12:39So I always say, if you wanted to do paper, rock, scissors on rates versus surveys, you go rates over surveys all the time. And, you know, again, COVID was the greatest example ever. Like, everyone was talking about depressions. Are you going to live and anything? Literally, when people realize I'm not going to die, oh, my God, rates are 3%. Let's get a house. You know, because you just got to survive to that next stage, right? If everyone's a living, then yeah.
13:05So surveys are useful for some things, like the builder survey is good for business. But if it really impacted housing for the consumer side, the data wouldn't look like it did this year. On the builder side, the builder survey collapse, and they'll tell you why. Higher lumber costs, rates are still elevated, profit margins are slowing down, units completely, you know, all these things.
13:30For the builders, yeah. But for consumers, so far, consumers on the housing side are moving off rates. And the 10-year yield is, I think, 4.27% last time I checked. And I think the high this year, intraday, was like 4.81%. So lower yields, demand picks up. Keep it very simple. Post-qualified mortgage, that's been the case.
13:53Okay, we will keep an eye on Sunday, Monday, what happens. It's going to be very interesting in the tariff on, tariff off.
14:01And now jobs week.
14:03Yes, that's my next topic is like, labor over inflation. Let's get into that labor data that you're expecting.
14:10So job openings, jobless claims, BLS jobs report, and then we have the ADP report, which doesn't have that much value compared to the other three. Now you get into another interesting aspect. We are firing federal workers. We're withdrawing. The reason I always tell people we're withdrawing money from the economy. That means it isn't just the firing of workers.
14:36There's contracts that are out there. That means less demand is coming into the economy. That's what money does. When you put money into the system, it filters itself in the economy. When you withdraw money from the system, it lowers aggregate demand.
14:50Sarah, what did the White House counsel tell us? They wanted to lower aggregate demand. What has Jay Powell told us over the years? We want to lower aggregate demand. Everybody wants to lower aggregate demand.
15:01But in this case, you know, going out for the rest of the year, if you don't have the government workers being in the pool, then the total jobs data falls. It's a total job data falls. Labor force stays constant. More people are looking for work.
15:14That's the other thing. Labor supply. White House counsel, labor supply, higher labor supply. Jay Powell, higher labor supply. So in this sense, it's designed to cool the economy down. But if you're cooling the economy down and inflation stays sticky, that's not kind of what you want out here.
15:33So we'll see how the rest of the year goes. But you can make a case that the unemployment rate was going to go higher. And that's what was our case. And now the Federal Reserve has raised their unemployment rate target. So we start to get into the phase to where we start seeing the impacts of government workers losing money being withdrawn.
15:53And what does it do to the unemployment rate? And so far, the bond market says we need to take yields lower, not higher in that in that environment, even with the inflation data on the P.C. side, at least for me now. But we have to handle still. My God, it's we still have core inflation on a 12 month basis to handle headlines still to handle.
16:15But it just it gets it gets trickier now. Right. You're trying to like micromanage, you know, certain things. And you could see why President Trump told the auto companies, don't raise prices. Don't do it, man. I'm going to be upset.
16:31OK, you know what else is tricky is just knowing where people are in that layoff process. So we know that like, OK, for instance, one of one of the executive orders a while ago now was like we want to lay off 50 percent of HUD workers.
16:46OK, but it but also then there's a lot of judicial actions that are like delaying that or they've been put on hold. So it's really hard to tell. Are those people employed? Are they on administrative leave? Have they been recalled? Are they still unemployed? Like it's from the outside. It's very hard to see exactly what is happening with that.
17:06OK, rule of thumb with the labor market, we always say be mindful of residential construction workers. But if you had to find one source of data line, the jobless claims data line is pretty efficient. There's the continuing claims data line, which has gotten softer, which means it takes people longer to find work.
17:23But the jobless claims four week moving average has been very efficient in terms of people who are unemployed and need to get that benefits. Now, of course, there's tech executives who have like a one year severance and they don't need to do anything. But in general terms, economic cycles still have moved off of four week moving average jobless claims and it has worked flawlessly again. I'm shocked, Sarah.
17:47All right. Everyone's like, oh, there's all these jobless claims. Data isn't really around. People don't apply. And it's 2025. We still haven't had the job loss recession. So we will be able to see it more efficiently from that data line. And we're still historically low. The continuing claims is a little bit more elevated because it takes longer to find work. But in a sense, if you fired 60,000 people and then like three weeks later, they find work doesn't really do anything. Right. They're still employed.
18:15So the jobless claims number historically post World War Two tends to rise on a four week moving average, a certain percentage. We always say target that three hundred twenty three thousand level on claims. Don't go into the recession talk until we get there. We're just not there yet on the weekly data. So we'll be able to see it. We saw the jobless claims data really perk up with the federal workers. It's kind of a separate data line and that has fallen down just a little bit.
18:42But you can't hide a job loss recession in the data line. Jobless claims always breaks and we're just a little bit mindful. But we need to get that upward to really make that claim right now and everyone else in the last.
18:5714 years outside of covid, we never had recessionary data. It's been very long for people out there. People talk about it a lot, but we're just not quite there yet.
19:07It's a great point because like, you know, I mean, then it goes down to the individual level. Is that individual level? Does that individual feel like they can file a jobless claim? So that's you know, that's at the point where you've been fired or you're not getting a paycheck or you don't think you're getting back like that's that's a good data line.
19:24So we're a service based economy. So typically what happens jobless claims on the lower wage sides of service workers tend to always apply for unemployment benefits, even though it's not the most efficient system in the world, especially certain states are really outdated.
19:41It tends to always work. So as long as something tends to always work, you go with it out here. And it's just it's just one of those weeks. And who knows? I mean, we're talking on Friday, maybe Sunday, Sunday.
19:53Trump's in Canada having, you know, pancakes with Carney or something, you know, they cut a deal or something. We don't know what happens in the future because things could change on time. But for right now, you could see, you know, just everyone's a little bit more mindful. The bond market's a little bit more mindful, but the 10 year yield has not crossed that key level.
20:15People are telling me I need to create a mythical character or a fictional character for this line. No, I'm not going to do yet. I was going to bring the witcher of all, but he doesn't really say anything too clever. So let's see if the 10 year yield breaks below 418, 415 and we get followed through buying. We got something there. That means the bond market is sniffing out weakness. Or you could say that, you know, the 10 year yield really can't go lower if inflation picks up. So it's crazy.
20:41So I'm telling you, it's for me, it's fun. But I can imagine for consumers out there, what is going on? Because those survey data's are terrible. Like literally, if I took about face value, this is worse than the like great recession, worse than COVID. But they tend to be ideologically driven. But the headlines are, it's confusing out there.
21:02Well, and the people who have to deal with consumers on the front line are real estate agents, you know, loan officers and the consumer sentiment. I'm sure they're seeing it firsthand.
21:13That's why I tell people, I implore people, if you really wanted to like find out what's going on 24-7 Instagram page, those story videos, I do not sleep. I keep everyone informed. I'm an economic cycle person first, housing seconds. I love this stuff. We try to make sense of it. But I would tell you, this is chaos.
21:31This is like, you know, COVID was one of those things where, you know, we were so depressed in economic activity. All we need to do is be alive and we're rebounding. 2008 was a credit bust, credit boom, credit bust, foreclosures, bankruptcies, the deleveraging process took years and years for that to happen.
21:50That's it. But here, we're just headline central, right? You know, one day something can say something. And, you know, I think Larry Kudlow, who used to be part of Trump's administration last time, he came out and said, you know, it seems like the tariff policy is a little bit confused about it.
22:10And one week it was fentanyl, the other is a trade deficit, the other is jobs. So clarity can bring chaos in, but you also have to live with the aftermath of what you choose. This is why I've always said I just don't believe anybody wants to go into a full trade war, because if you really believed in tariffs, you would just, day one, we're going to be here for decades. This is how it's going to be.
22:37But so far, nobody's really committed to that. They'll do something, they'll take it back. And, you know, I get if you wanted to make deals off it, that's fine. But the problem with going early and taking it off and on and on, you got to do something or else you get called on your bluff. And then, yeah.
22:55Well, and, you know, he's Trump loves a marketing thing. So, you know, Liberation Day. So he's kind of branded it now. Something has to happen on that day. Otherwise, like, what does that all mean?
23:05Yeah, that's why the next few days, we've talked about this for the last, what, six, seven weeks. If you go early and you call stuff off and people are calling you on it, you eventually have to do something. Right. Or else it's just, it's just like, you're not serious. And then other countries figure this out. So it's going to be a lot to take in over the next seven days. So seven days from now, we'll do that Friday podcast. So we'll see what the aftermath is. But yeah, there's a, there's a lot.
23:35There's a lot of variables right now that can be very big things, or they could just calm things down. But I get it. I get if you're a consumer or home buyer or home seller, what's going on? This is chaos. And I love chaos. Oh, I love chaos.
23:53You're the only person here who loves chaos.
23:55No, right. Only you. But also, I mean, we wouldn't have this podcast where we have you on three times a week, if we were in that sort of snoring mode.
24:05I'll always find something to talk about. Economics doesn't sleep. If it doesn't sleep, it doesn't sleep.
24:11If it doesn't sleep, it doesn't sleep.
24:13Economics doesn't sleep. It might not be the most exciting thing or topic, but you know, there's always something to talk about. But this is just, this is getting beyond economics because it's now tiltering on the sidelines.
24:28if we have those conversations.
24:29I'll always find something to talk about.
24:32Economics doesn't sleep.
24:33It might not be the most exciting thing or topic,
24:36but there's always something to talk about.
24:38But this is just, this is getting beyond economics
24:41because it's now tiltering on the survey data.
24:44It's just on everyone's mind out here.
24:46It's not just firing federal workers
24:48or Doge doing their things.
24:51There's a lot of things we got.
24:53It's not just America, it's other countries as well.
24:55So, just think of me as the economic Jack Bauer.
25:02That's what I am.
25:03I'm 24.
25:04I'm the economic Jack Bauer.
25:05I'm here to solve everything.
25:06We have another persona coming out right now.
25:09Yeah, that's really what it is.
25:10I'm just Jack Bauer 24 seven.
25:14Are you gonna strangle someone with a lamp?
25:17Remember that famous episode where-
25:19No, no, you know what, Jack?
25:20This is what I was,
25:23I think it was the first or second season
25:24where he just asked his guy,
25:25do you have a chainsaw?
25:27You know, a cutting thing.
25:28And he had to like scare the individual.
25:30So, he like decapitated a head
25:32and then, you know, it's mind games out there.
25:35But, Jack, that was a great series.
25:39That was a great series, especially the first couple.
25:42Okay, Logan, thank you so much for keeping it entertaining.
25:45We will check in with you.
25:46Pleasure, as you can see, I'm pumped.
25:47I'm juiced.
25:48I'm ready to go.
25:51All right, talk to you soon.
25:54Bye.