US Jobs Market Reasonably Solid Despite Modest Jobs Gain: Economic Analyst

The new jobs report today shows the US economy seeing modest gains in in the number of jobs. Meanwhile, President Trump announced a purchase of $200 billion dollars in mortgage bonds to lower loan rates. Joining us to discuss is Joseph Travisani, economic and currency analyst at FX Street. Joseph, good afternoon. Uh hope you're doing well so far in the new year. Uh so jobs increased by 50,000 uh and this was below forecasts. Is the labor market stalling? I think the labor market is reasonably solid. By the way, good afternoon, Don. Nice to see you in the new year. I think it's reasonably solid. It's not producing a great a great number of jobs as in the numbers out of the labor department. But do you remember what we have here? They have revamped their way of calculating jobs. And so it's a different it's a different ballgame now without the input of what used to be called the birth death model. So it looks to be still a pretty reasonably solid job market. What do you think is contributing to uh perhaps uh constrained job creation? Because during the Biden administration, you remember this, we were often getting monthly numbers of over a 100,000, >> right? And a lot of those numbers in the Biden administration were later advised revised away which was the problem with using the birth death model that the b that the labor department uses or used to use to classify and to calculate estimate jobs that are created in the month. So it it's hard to say exactly what is behind you're not getting the type of 100,000 150,000 jobs that you were getting. As I said, part of that is a revision of the way they're calculating jobs. Part of it, I think, is probably also uncertainty about where the economy is going to go. >> What about tariffs? How do tariffs play into this equation? Is it having an impact that's leading to lower hiring? >> Well, that's interesting. I don't think it really is yet, and I don't I don't anticipate that it's going to. there when the tariffs were first started and as an economic policy back last year in April and May, there was a great deal of speculation uh in the economic community and the forecasting community that this would be a huge hit to jobs and it would be a huge boost to inflation. Neither has happened. I thought at the time, and I still do, that the threat to inflation, which could eventually turn into a threat to jobs, was overstated because manufacturers and retailers will absorb and did absorb much of the increases to maintain their market share. So, that particular problem hasn't occurred. Will the the tariffs um achieve their stated goal of revitalizing US uh manufacturing which would of course mean more jobs has yet to be seen. >> So Joseph I don't think you would classify this as extraordinarily strong job growth. So if that is the case I want to ask you can the economy grow without such growth? Uh yes, I think it can because what you're looking at, remember behind these job numbers that we've seen and if you look at the fourth uh the last three job numbers, they're actually flat because the the third prior 31, I'm sorry, the prior three months ago was down 105,000. So the last three jobs numbers are flat. But if you look behind that, you look at job at a GDP that in the last three quarters is growing. If you take the uh Atlanta Fed's GDP estimate for the fourth quarter of 5.1% their latest one at a 4.4% rate in the last three quarters, that's the second, third, and the fourth quarters of last year. With that kind of GDP growth, it is very difficult not to expect a much stronger job market in this year. I would say 100, 150,000, 200, many more jobs once the economy gets sorted out as to what is actually happening and where the growth is occurring. >> Okay, we'll keep a close watch on that, but I want to move on to President Trump announcing a purchase of $200 billion in mortgage bonds. And of course, you know, the goal is to reduce mortgage rates, lower monthly payments, uh make it more affordable to buy a home. How how much of a difference do you think that's going to make in actually lowering mortgage mortgage rates? >> Well, it will. I mean, the market I mean the 30-year mortgage 30-year average or the 30-year mortgage dropped 22 points today. Um, that's a pretty substantial amount for a one-day move. It's now below 6%. I think mortgage rates, the two things that go into, of course, um, housing purchases are jobs, which are stable and steady, and interest rates. mortgage rates specifically. If you look at the numbers over the past five years, the uh the number of home purchase, existing home sales has dropped almost 40% from the fourth quarter of 2020. And the large portion of that is the rise in interest rates that attended the inflation that we saw throughout the middle and later part of the Biden administration. So I think yes, two things are true here. One, the market now senses what the direction is. I don't think the Fed is going to intervene in the markets to the same degree that it did in CO where it bought like 500 million 500 billion and more and over a trillion in total of MBS paper. I don't think that's going to happen, but it certainly is the direction markets are going. And if the Fed [clears throat] moves a little bit more on lowering the Fed funds rate, I think market rates and interest rates will follow. >> Okay. So, what are the core reasons uh that mortgage rates are higher now than before? And uh do you think that President Trump will have to you know continually purchasing these bonds in order to keep the rates uh sustained at a lower lower rate? >> Well, it's an interesting question. Uh will President Trump continue to berate the federal authorities and the Fed about what he wants for his policy? Yes, I think he probably will. That is Mr. Trump's way of doing business. the greatest I think the greatest impact on the decline in home sales particularly existing home sales um has been the rise in interest rates and they attended the inflation of the Biden administration from the when we went up to 9% in total for the CPI. So I think that is the greatest impact. On top of that you have a falling off of about 20% in the number of new homes started. New homes tend to be the the homes that first-time buyers um buy that they contract for in a mortgage. That is the most sensitive I think sector for interest rates. In other words, new home buyers who have of course less money, less established credit need lower interest rates more than established buyers. So the more you get interest rates down the more that particular sector of the market of the housing market I think will expand. Once there are buyers on line then you get builders online then you get new home starts. So I do think that interest rates going down headed lower both by the Fed's pressure and if you want by job owning from President Trump will impact and will improve the housing market. >> Okay. Just finally uh two things here. One is do you think if President Trump stop stops buying these uh these bonds that rates will go back up? And um the second thing is what is the impact on affordability if large investors are barred from purchasing more single family homes which President Trump said he's taking steps to do this? >> Yes. I don't think it's ne I don't think if the if the Fed stops no one in the market is expecting the Fed to start a massive MBS buying program or or loan buying program to drive rates lower. I don't think that's the case. I don't think that's in the cards. I don't think anybody expects it. So, if the Fed buys 200 billion of MBS and then doesn't buy any more, I don't think it's going to make a lot of difference in the overall interest rates and the 30-year mortgage. That will go up and down with what rates are doing in general. If the federal authorities ban, as you say, investment in houses by corporations, then yes, that will free up, it will take some of the pressure from the housing market because after all, why is a large corporation or a private equity company buying homes? Well, they're buying it because they expect prices to go up. They're not going to live in the homes. So if that is limited, yes, it will leave more homes available for the retail buyer and take some pressure from prices because if you look at the median home price, it's almost almost 50% in the past, I think since co that is a very high increase and makes it difficult for retail buyers, especially new buyers, firsttime buyers to get into the housing market. >> Okay, Joseph, it's always good to speak with you. Thank you so much for coming on today. >> Thanks for having me on. Have a good afternoon. >> You as well.