Episode summary
The truth of what’s happening in the labor market
HousingWire Daily
· · 25 min · Hosts: Sarah Wheeler · Guests: Logan Mohtashami
Summary
Logan Mohtashami argued that the strong jobs report does not change the broader picture for mortgage rates or the Fed’s path. He said labor data has stabilized rather than reaccelerated, with the three-month job average at 82,000 versus his break-even estimate of 78,000, and he pushed back on the idea that the economy is on the edge of a cliff. In his view, the market has already priced in a lot of the current macro risks, so the report itself should not meaningfully move the 10-year yield or mortgage spreads.
He said the Fed is likely to remain hawkish until it sees softer inflation, weaker labor conditions, or slower growth and investment. He also argued that higher rates, a firmer dollar, and elevated energy prices make the administration’s trade goals harder to achieve, because a manufacturing push needs lower rates and a weaker dollar to work. He framed the current setup as incompatible with both strong growth and very low borrowing costs.
Mohtashami also focused on wages and housing affordability. He said wage growth at 3.1% is still running below home-price growth, which supports affordability relative to 2023, but not enough to make housing broadly cheap. He cautioned that policy moves like expanding capital gains exclusions could worsen bidding pressure in already tight markets such as San Francisco.
Key takeaways
- Logan Mohtashami said the labor market has stabilized, with a three-month average of 82,000 jobs versus his 78,000 break-even estimate.
- He argued the strong jobs report does not change mortgage spreads, because the 10-year yield and rates have already priced in much of the current risk.
- Mohtashami said the Fed is more likely to stay hawkish until inflation cools and labor-market weakness shows up in claims, unemployment, or growth.
- He said wage growth at 3.1% is still helping affordability relative to home-price growth, but not enough to solve the housing market.
- Mohtashami argued that lower rates and a weaker dollar are necessary for the administration’s trade and manufacturing goals, which he said are not compatible with current conditions.
Notable quotes
“the labor market just stabilized. I this not a re-acceleration. I've talked about it's not I don't believe this is”
“my break-evens are 78,000. If we could create 78,000 jobs per month on a moving average, we should be fine”
“It doesn't change spreads”
“You can't get the lowest interest rates because you want to have a better advantage for your trade war”
“wage growth is still uh going over home price growth and uh that's that's been one of the positive stories last year”
How the episode opens
Welcome everyone. I'm joined today by lead analyst Logan Mohtashami to talk about the strong jobs report and what it means for mortgage rates, especially with the September Fed meeting coming up. Before we dive in, here are the top five trending stories on housingwire.com.
First is Pulte says FHFA weighing bi-merge single credit report. Followed by Logan's article on today's topic, why mortgage rates barely budged after jobs report beat estimates. Then we have Vishal Garg lays out Better Turnaround Plan amid battle with board.
And NAF lays off 160 employees in consumer direct division. Finally, we have ice raids strain homebuilder labor cycle times and bank lines. We have a lot to talk about today, so Logan, welcome back to the podcast.
Oh, we survived it. We survived this crazy, crazy, crazy week. And you know, who would have thought that we went from economic D-Day like to sanction Iran to we're not going to shoot anymore to a tanker to tanker policy.
We had a jobs data that beat estimates. And the 10-year yield is like flat to slightly lower on this Friday. And didn't really want to break out higher and like we've always said uh uh for those of you that follow me on Instagram, you know, Monday morning when the 10-year old was I was short-term this looks very toppy just cuz it's very oversold and and if I a lot happened this week.
Uh but I think today's focus is like what's really going on in the labor market cuz I I had to go on LinkedIn and like scold people. Um because
To. — I I had to, yeah. I had to scold people. And there's an institution in the United States that appreciated that. I I believe people in the mortgage industry are listening to people who are might not be trained in reading economic cycle works tied to Fed policy and how that maneuvers the 10-year yield and stuff with inflation.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- jobs report
- labor market
- mortgage rates
- housing market
Watch the episode
Watch “The truth of what’s happening in the labor market” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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