Episode summary
What the jobs report means for mortgage rates
HousingWire Daily
· · 19 min · Hosts: Sarah Wheeler · Guests: Logan Mohtashami
Summary
The strong April jobs report, with payrolls up 178,000 and the unemployment rate lower, did not change Logan Mohtashami’s broader view that the labor market is still cooling enough for the Federal Reserve to feel progress on inflation. He argued that wage growth slipping to about 3.5% matters more than the headline job gain, because the Fed needs wage growth at 3% or lower, plus about 1% productivity growth, to get inflation back to 2%.
Mohtashami said jobless claims remain the key labor signal and that low claims keep the Fed from moving meaningfully away from neutral policy. In his view, that makes it very hard for the 10-year yield to break much lower and, by extension, very hard for mortgage rates to fall below 5.75% unless there is a recession or a shift out of neutral policy.
He also said the bond market is being driven more by the war and oil prices than by the jobs data right now, even though labor numbers have been beating expectations. For housing, he said mortgage spreads have been the main reason rates have stayed closer to 6% than worse levels, and he expects to watch purchase application trends, inventory growth, and weekend headline risk for signs of how demand responds next.
Key takeaways
- Logan Mohtashami said the April jobs report beat estimates, but the bigger story is wage growth cooling to about 3.5% and moving toward the Fed’s 3% target.
- Mohtashami said jobless claims are the most important labor indicator because low claims keep the Fed anchored near neutral policy.
- He argued mortgage rates under 5.75% are unlikely without a recession or a major policy shift, because the 10-year yield is capped by neutral policy.
- Mohtashami said mortgage spreads have been crucial in keeping current mortgage rates near 6% despite market volatility.
- He expects purchase applications to slow further week to week, while tracking whether year-over-year demand turns negative.
- Mohtashami said the war and oil prices are the main forces overshadowing the jobs data and the housing outlook right now.
Notable quotes
“to me, wage growth now down to three and a half%. We are 0.5% away from the Fed declaring victory”
“jobless claims is the most important jobs report for the last three years. It always has been”
“if you're not out of neutral policy, it is very hard to get mortgage rates under 5.75%. Ever”
“the best story for last year and this year, mortgage spreads. Man, we wouldn't be here if it wasn't for mortgage spreads”
“housing is somewhat insulated uh to this just because the spreads are better”
How the episode opens
Welcome everyone. My guest today is lead analyst Logan Motoshami to talk about that jobs report. Before we dive in, I want to thank our sponsor, Total Expert, for making this episode possible. Logan, welcome back to the podcast on this Good Friday and jobs Friday.
Jobs Friday. You know what? Uh Trump just did a truth social post and he was like, "We're going to open up the straight and we're going to take the oil, you know." So, uh you remember the old Mad Max movies, you know, um and so there was a guy who had like a Jason Friday the 13th mask on and he had like a microphone and you know,
You know, and he was like giving a speech about giving us the oil and I'm like, "Homies, Trump just went Mad Max. we're gonna take the oil, you know, and but this is the world we live in. Um, in any case, it is jobs Friday.
Uh, uh, jobs data uh, uh, beat estimates uh, 178,000 unemployment rate fell. Uh, of course, the previous month was revised uh, 30 40,000 lower. So, when you average out the two months because there's some there were some distortions in the previous month, uh, it's, you know, you're roughly looking at 20 or 30,000.
But if you take take like the six-month average, you're at like 66 68,000 roughly right about there. We report just came out, so I try to get much of the breakdown. But to me, wage growth now down to three and a half%.
We are 0.5% away from the Fed declaring victory.
Okay. I've always thought this said that they want to destroy wage uh wage. — Yes. for since 2022. The reason I have labor over inflation and everything, uh the Federal Reserve really believes that they can get 2% inflation as long they need wage growth down to 3% or lower and then they could take the 1% productivity trend.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- jobs report impact
- mortgage rates
- federal reserve policy
- housing market outlook
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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