This edition of the Auto Market Weekly Summary includes updates on job growth and unemployment, credit availability, inflation, as well as household debt and credit trends. We expected the first reads on tax refund figures around Feb. 6, but those haven’t been released yet, and we’re still awaiting the first official report of the year. Even without seeing official IRS data, the strength we’re observing in Manheim pricing trends suggests tax refunds are already flowing to consumers.

Bottom Line Up Front

The employment report arrived a week late but delivered a gut punch to what had looked like modest job growth: Preliminary benchmark revisions slashed 2025 job creation from 584,000 to just 181,000 – a stunning 69% reduction that brings the monthly average down to a mere 15,000. While January’s 130,000 added jobs beat expectations, the revised full-year picture reveals an economy creating far fewer jobs than initially reported, potentially strengthening the case for Fed rate cuts this year despite inflation remaining above target.

Credit conditions remained accommodative in January with the Dealertrack Credit Availability Index holding at 100.0, matching its best level since October 2022. However, the steady headline masks rising risk signals underneath: Negative equity surged to 56.3%, subprime share climbed to 15.7%, and yield spreads widened 31 basis points – suggesting lenders are pricing in additional risk even as they expand access. The New York Fed’s Q4 Household Debt and Credit report reinforces these concerns, showing median credit scores for new auto loans falling from 724 to 716 and subprime originations surging 12% year over year. Auto loan balances barely budged despite improving credit availability, suggesting consumers remain cautious about taking on vehicle debt even as lenders relax standards.

Inflation delivered welcome news, with the Consumer Price Index (CPI) decelerating to 2.4% year over year as energy deflation and a sharp 1.8% month-over-month drop in used-vehicle prices helped offset persistent shelter inflation. Core CPI’s uptick to 0.3% monthly keeps the Fed in patient mode, though the overall disinflationary trajectory supports eventual rate cuts. For dealers, the combination of dramatically weaker job creation, elevated but easing inflation, and credit that’s flowing but carrying more risk creates a complex environment heading into tax refund season – which appears to already be benefiting used-vehicle prices based on Manheim trends.

Job Growth and Unemployment Trends

The January employment report was a week late and was published on Feb. 11. While job growth was higher than expected for the month of January, the benchmark revisions to the establishment survey data make job growth look even more anemic than originally believed over the last year. Prior to last week’s revised report, the economy appeared to have added 584,000 jobs in 2025 – at a pace of 49,000 per month. With the revised report, total job growth in 2025 was only 181,000 jobs created, for a monthly average of just 15,000, potentially fueling the case for more Fed cuts this year.

  • The U.S. economy added 130,000 jobs in January, well above the estimate of 66,000, but the benchmark revisions to full-year 2025 data tell a more concerning story.
  • November jobs created were revised down 15,000 (to 41,000), and December jobs created were down 2,000 (to +48,000). The three-month rolling average now stands at 73,000 jobs, greatly helped by January’s higher figure.
  • Full-year 2025 revised sharply lower: Preliminary benchmark revisions will revise total 2025 job growth from +584,000 to +181,000 – a downward revision of 403,000 jobs, or 69% of initially reported growth. Monthly job creation averaged only 15,000 per month in 2025, a very low rate that should signal some risk even in the currently low job-growth environment.
  • The unemployment rate fell to 4.3% from 4.4%, the second sequential monthly decline, though it remains 30 basis points above year-ago levels. Labor force participation (62.5%) and employment-population ratio (59.8%) were little changed from December levels.
  • Average hourly earnings rose 0.4% in January and are up 3.8% year over year, continuing to outpace the rate of inflation.
Auto Credit Availability

The Dealertrack Credit Availability Index held steady at 100.0 in January 2026, its best level since October 2022, but individual metrics revealed a more complex picture. While credit access broadened through increased subprime lending and longer loan terms, rising risk signals tempered the overall outlook.

  • Subprime share rose 70 basis points (bps) to 15.7% (up 290 bps year over year), reversing a two-month pullback and signaling renewed lender appetite for higher-risk borrowers.
  • Negative equity surged 220 bps to 56.3%, fully erasing December’s improvement and hitting its highest recent level.
  • Yield spreads widened 31 bps to 7.14%, suggesting lenders are pricing in additional risk even as they expand access.
CPI

January’s inflation data showed continued, but modest, disinflation, with the Consumer Price Index rising 0.2% month over month, down from December’s 0.3% pace. The deceleration brought the year-over-year rate down from 2.7% to 2.4%, meeting expectations and supporting the Fed’s patient approach on rate cuts. Energy deflation and easing used vehicle prices helped offset persistent shelter inflation.

  • Energy prices fell 1.5% in January, contributing to the overall moderation. Year-over-year, energy is now down 0.1%, with gasoline prices declining 3.2% for the month and down 7.5% versus January 2025.
  • Core CPI rose 0.3% in January, a slight uptick from December’s 0.2% pace, though the 12-month rate edged down from 2.6% to 2.5%. Services prices rose at a 0.4% monthly pace, while goods prices were flat.
  • Shelter costs increased 0.2% for the month and remain up 3.0% year-over-year. Shelter accounts for roughly 36% of the overall CPI basket, meaning its continued price growth – even at a moderating pace – exerts outsized influence on headline inflation.
  • Used vehicle prices dropped 1.8% in January and are now down 2.0% year over year. This represents an actual decline in prices, not just slower growth.
  • Food inflation cooled to 0.2% in January from December’s 0.7% jump. Year-over-year food prices are up 2.9%, meaning prices continue climbing but at a more moderate rate than in recent months.
Q4 Household Debt and Credit Report

The New York Fed released its Q4 2025 Household Debt and Credit report this week, highlighting growing debt balances across the consumer landscape – a trajectory that continues to put pressure on household finances as interest rates remain elevated. The automotive lending landscape showed mixed signals, with credit quality deteriorating for certain segments while origination volumes held relatively steady, underscoring the delicate balance dealers face between meeting sales targets and managing risk exposure.

  • Auto loan balances edged up modestly to $1.66 trillion, increasing just $12 billion in Q4 – a tepid growth rate that suggests consumers remain cautious about taking on new vehicle debt despite improving credit availability. New auto loan originations totaled $181 billion in the quarter, up 3% year over year but slightly below Q3’s $184 billion pace.
  • Credit quality for auto loans loosened at origination, with the median credit score for new auto loans declining from 724 to 716 between Q3 and Q4. Subprime mix of new loans increased to 18% in the most recent quarter, up from 16% in the prior year and 3 full points ahead of Q3 2025 levels. Subprime originations were up 12% year over year.
  • Auto loan delinquency rates held mostly steady in the transition into early delinquency (30+ days late), though the report notes aggregate delinquency rates across all debt types worsened slightly to 4.8% of outstanding balances – up 0.3 percentage points from Q3.
  • Student loan balances increased to $1.66 trillion, rising $11 billion in the quarter, with delinquency rates (90 Days Past Due) remaining elevated at 9.6%, up 21 bps in the quarter. The student loan transition into early delinquency ticked up more significantly than other loan categories, reflecting continued stress from the resumption of payment reporting following the extended pandemic forbearance period.