I had to think the other day that Trump’s plan to lower priority rates could be through increased unemployment.
While everyone is apparently focused on the other side of the coin, inflation, it might be the wrong place to see.
We have talked about customs and deportations when we may have to talk about all the jobs that are removed in Washington and beyond.
Remember, Fed’s double mandate is price stability and sustainable employment.
If we see a wave of redundancies that we already see, Fed could be forced to act.
DOGE SAYS, call my bluff on government’s fires
When Trump was driving for his second period, he promised to reduce federal expenses and the size of the federal government.
To help him perform this difficult mission was Elon Musk, who, ironically, revealed the “Department of Government Efficiency” or DOGE card.
If you need a quick background about it, it’s basically a spectacle on the long -standing DOGE -MEME, which is a Shiba Inu dog that appeared in the early 2010s.
The real dog called Kabosu was depicted with silly, broken English text overlays that used modifiers such as “such” and “Much.”
For example, if I had to create one (which I just did above) for what is going on with all these job cuts, it can say something “very redundancies”, “such unemployment” and “wow.”
And even though it’s all completely absurd on the surface, it all became very real when the permeague messages came in streaming.
DOGE -Government organization launched for approx. a month ago, and it’s been non -stop government slopes ever since.
In the meantime, the tariffs we all feared would drive inflation we pretty much put on waiting, except for China’s.
So maybe we should focus on jobs (sustainable employment) instead of inflation (price stability) when we look at the overall economic picture.
Thousands of government redundancies and buyouts have already taken place, with more coming
Although it is unclear how many government jobs have been switched off, either through redundancies or acquisitions, it is not a small number.
And it doesn’t seem to be over. If we simply consider buyouts, approx. 75,000 federal workers the exposed buyout program according to the US Personnel Management Office.
At the same time, thousands of government employees have been completed at a number of high levels, including the energy department, the Department of Education, EPA and many others.
Then there are almost CFPB, mass friezes at the IRS and the 1,000+ job cuts at the Department of Veterans Affairs (VA).
Oh, and news that half of the staff at the Department of Housing and Urban Development (Skin) have been released.
In other words, the Doge initiative is very real and the fallout becomes great. We have no idea how big yet, but it is clear that many jobs are lost.
There are reportedly 2.3 million civilian workers in the federal government, and it seems that many are targeting somehow.
In addition, there is wear and tear where government workers are volunteering or quitting, perhaps in some form of protest.
I actually know someone who has decided to leave. At some point, all this will appear in the employment data.
And if you were not aware of, the job report can affect the mortgage rates in a larger way.
Long story short, the gloomy job image, the lower priority rates tend to go as it signalizes a weakened economy and perhaps cooler inflation.
Trump is not addicted to bold but maybe forced their hand anyway
It brings us back to bold. While the newly appointed Treasury Secretary Scott Bessent said last week that Trump will not ask bold to lower the rates, it could still go that way.
While he said Trump was focused on the 10-year bond yield that correlates well with 30-year-old mortgage rates, Fed may still be forced to act.
If unemployment increases significantly as a result of all public job losses, Fed may need to calibrate its monetary policy. It could also throw off their “soft landing.”
And while there is no direct effect of bold-back cuts on long-term mortgage rates, they tend to share a directional component.
In other words, whose fat cuts more due to a worsening economy, the chances of 10-year-old bond yield will also fall, probably before the Fed cuts.
This would indicate lower priority rates before the bold comes around for cutting, and in the process would be a roundabout way to reach the target of lower interest rates for consumers.
Of course, it would be at the expense of potential millions of government jobs, which is unclear if there would be a replacement.
So in the end, the 30-year-old fast may seep down to the low-6s or even tall 5 years this year if it happens, but not without serious financial fall.
It also makes you wonder what will happen in areas with a high concentration of government workers, such as in and around Washington DC
I’ve already heard that lists for sale have sprung up, even though we need more time to see how real that story is.
But it can hurt the local housing markets, provided that these homeowners are leaving.
However, one can question where they would go if they already have the best deal in the city in the way of a 2-4% 30-year fixed rate.
Read on: 2025 Predictions
Before creating this site, I worked as a banking director of a wholesale loan in Los Angeles. My practical experience in the early 2000s inspired me to start writing about mortgage loans 19 years ago to help potential (and existing) home buyers better navigate the home loan process. Follow me on x for hot take.
