Current Events in March 2016

Another strong month for private sector employment gains.

The ADP National Employment Report says payrolls rose by 214,000 from January to February with service-providing companies providing most of the strength.

Employment in that sector rose by 208,000 jobs in February, as professional/business services contributed 59,000 jobs. Trade/transportation/utilities grew by 20,000, and financial activities added just 8,000 new jobs -- the least since last August.

Goods-producing employment rose by 5,000 jobs in February, just over a quarter of January's upwardly revised 19,000. There were 27,000 new jobs in the construction industry, slightly above January's upwardly revised 26,000, while manufacturing lost 9,000 jobs -- the second largest drop in five years.

Small business on the move

Payrolls for businesses with 49 or fewer employees increased by 76,000 jobs last month, while employment among companies with 50-499 employees increased by 62,000 jobs. Employment at large companies -- those with 500 or more employees -- came in at 76,000, a big jump from January's 44,000. Companies with 500-999 employees added 14,000 jobs, while companies with over 1,000 employees gained 62,000 jobs.

"Large businesses showed surprisingly strong job gains in February, despite the continuation of economic trends that negatively impact big companies like turmoil in international markets and a strengthening dollar," said Ahu Yildirmaz, VP and head of the ADP Research Institute. "The gains were mostly driven by the service sector which accounted for almost all the jobs added by large businesses."

A trend for higher wages?

Stifel Fixed Income Chief Economist Lindsey Piegza notes the labor market has been rapidly improving towards full-employment with more than 60 consecutive months of positive job creation, but that wage growth has been "stubbornly low."

She says with back-to-back months of above-trend growth in salaries, the February jobs report from the Labor Department, due out this Friday, "will confirm if the upward momentum in wages is a sustainable trend or simply a temporary phenomenon."

Another drop in applications for mortgages -- the second in as many weeks.

The Mortgage Bankers Association (MBA) reports mortgage applications were down 4.8% in the week ending February 26 from the previous week, which included an adjustment for the President’s Day holiday.

The Refinance Index fell 7%, taking the refinance share of mortgage activity down to 58.6% of total applications -- its lowest level since January.

The adjustable-rate mortgage (ARM) share of activity dipped to 5.6% of total applications, the FHA share was unchanged from 12.0%, the VA share was 12.1%, and the USDA share of total applications held steady at 0.7%.

Contract interest rates

• The average contract interest rate for 30-year fixed-rate mortgages (FRMs) with conforming loan balances ($417,000 or less) dipped two basis points -- from 3.85% to 3.83%, with points decreasing to 0.39 from 0.42 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
• The average contract interest rate for 30-year FRMs with jumbo loan balances (greater than $417,000) dropped to 3.75% from 3.80%, with points increasing to 0.31 from 0.25 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 30-year FRMs backed by the FHA was down five basis points to 3.67%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 15-year FRMs inched up to 3.13% from 3.12%, with points decreasing to 0.31 from 0.40 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 5/1 ARMs fell to 3.02% from 3.07%, with points increasing to 0.31 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The survey covers over 75% of all U.S. retail residential mortgage applications.

Gasoline prices are rising a bit nationwide, but it has less to do with a stabilizing price of oil than annual refinery maintenance, which reduces output and normally raises prices.

According to AAA, the national average price of gasoline is $1.75 a gallon, up five cents a gallon from a week ago. The increase is more dramatic in California, where Gasbuddy reports the average price of gasoline has risen 10 cents a gallon in the last week.

A reader, Robert from Oceanside, Calif., reported that diesel fuel in his area is also going up, and wonders why.

Why is diesel going up?

“Why does it seem that diesel prices seem to rise when the California summer blends are mandated and the price of gasoline rises?” he wrote in an email to ConsumerAffairs. “To my knowledge there is no summer blend for diesel. This seems like a rip off to me. Can you explain?”

Patrick DeHaan, senior petroleum analysts at Gasbuddy, said his numbers show the statewide price of diesel in California has actually gone down a penny a gallon, but says its possible prices have risen in some areas.

“Some stations may have raised diesel prices as crude oil prices have risen, prompting not only gasoline to rise, but other refined fuels, such as jet fuel and diesel,” DeHaan told ConsumerAffairs. “Keeping in mind all refined products are impacted when a refinery does maintenance as well – not just gasoline production – so diesel could rise due to refinery maintenance season.”

Agriculture demand

California is a big agricultural state and producers use a lot more diesel fuel starting in the spring. DeHaan says as agricultural consumption rises in the spring, demand goes up and so does the price. But there is some good news on the horizon.

“Usually diesel’s peak price is during winter and is lower during summer,” DeHaan said. “I expect that to be the case this summer as well.”

After the price of crude oil, refinery operations have the biggest impact on gasoline prices. Last summer, while much of the rest of the nation continued to enjoy falling fuel prices, consumers in the Midwest saw pump prices escalate because of issues at a BP refinery that sharply curtailed the delivery of fuel to several states.

More contraction in the manufacturing sector of the economy in February.

The latest Institute for Supply Management (ISM) manufacturing report on business put the February purchasing managers index (PMI) at 49.5%, an increase of 1.3% from January.

A reading below 50 means contraction in the sector, making February the fifth consecutive month that manufacturing has failed to expand. The overall economy meanwhile has grown for 81 straight months.

Inside the number

The ISM Manufacturing Business Survey Committee also reports the New Orders Index was unchanged last month at 51.5%, the Production Index rose 2.6%, as did the Employment Index.

Inventories of raw materials posted a gain of 1.5% and the Prices Index registered was up 5%, indicating lower raw materials prices for the 16th consecutive month.

Of the 18 manufacturing industries, nine reported growth in February in the following order:

1. Textile Mills;
2. Wood Products;
3. Furniture & Related Products;
4. Miscellaneous Manufacturing;
5. Electrical Equipment, Appliances & Components;
6. Food, Beverage & Tobacco Products;
7. Chemical Products;
8. Primary Metals; and
9. Paper Products.

The seven industries reporting contraction in February -- in order -- are:

1. Apparel, Leather & Allied Products;
2. Petroleum & Coal Products;
3. Computer & Electronic Products;
4. Printing & Related Support Activities;
5. Transportation Equipment;
6. Plastics & Rubber Products; and
7. Fabricated Metal Products.

January was a good month for homeowners as prices rose on both a year-over-year and month-over-month basis.

Property information, analytics and data-enabled services provider CoreLogic reports its Home Price Index (HPI) shows home prices nationwide -- including distressed sales -- increased year over year by 6.9% and was up 1.3% from December.

“While the national market continues to steadily improve, the contours of the home price recovery are shifting,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The northwest and Rocky Mountain states have experienced greater appreciation and account for four of the top five states for home price growth.”

Looking ahead

The CoreLogic HPI Forecast indicates home prices will jump 5.5% from January 2016 to January 2017, and 0.5% from January to February.

“Heading into the spring buying season, home prices continue to rise across much of the country,” said Anand Nallathambi, president and CEO of CoreLogic. “With rates staying low for now and continued solid job and income growth, the spring buying season is shaping up to be a good one.”

The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

Whole Foods Market in Austin, Texas, has issued a national recall for Maytag Raw Milk Blue Cheese.

The product may be contaminated with Listeria monocytogenes

No illnesses have been reported in connection with this recall to date.

The recalled cheese was sold cut and packaged in clear plastic wrap with scale labels in various weights reading “Maytag Blue Raw Milk,” “Maytag Blue” or “Maytag Iowa Blue Cheese” and with PLU numbers beginning with 293308 and “sell-by” dates of 1/20/2016 and 3/21/16.

The product was sold from cheese cases in various Whole Foods Market stores nationwide.

What to do

Customers who purchased this product should discard it, and may bring their receipt into the store for a full refund.

Consumers with questions may call 512-477-5566, extension 20060, Monday through Friday, 8:00 a.m. to 5:00 p.m. (CDT).