Auto Market Weekly Summary

Job growth in December was stronger than expected, but prior months were revised down. The three-month average shows slowing growth, and that slowing should continue in 2024. The unemployment rate was steady as labor force participation fell and wage inflation accelerated slightly.

The pace of new-vehicle sales increased in December as sales into rental fleets jumped, and incentives and discounting grew.

December Job Growth Slowed but Came in Stronger Than Expected

Job growth in December accelerated modestly and was stronger than expected, but prior job numbers were revised down.

December saw 216,000 jobs created when 175,000 had been expected. The prior two months were revised down for a net decline of 71,000 fewer jobs than originally estimated.

The private sector created 164,000 jobs in December. Manufacturing saw 6,000 new jobs. Services produced 142,000 new jobs. Education and health care had the largest gain in the private sector, with 74,000 jobs created, a decline from 109,000 in November. Auto dealers added 600 jobs, which left employment at dealers down 37,400 or 2.8% below the February 2020 level. Total payrolls now exceed February 2020 payrolls by 4.9 million or 3.2%.

The three-month moving average of new jobs, a reliable indicator of momentum, is now 165,000, which is the slowest pace in three years.

Soft Landing for the Economy Looks Likely

The Fed’s efforts to slow the economy and specifically the strong labor market have borne fruit as job creation is much lower than a year ago, but a “soft landing” still looks likely.

Based on the initial estimates, 2023 saw 2.7 million new jobs created, a resoundingly different result compared to losses we could have faced in a widely feared potential recession. Job growth in 2024 should moderate to about half of the growth in 2023, but growth is better than decline.

The headline unemployment rate was steady at 3.7%. The labor force participation rate declined to 62.5% from 62.8% in October, which had been the highest level since February 2020. Participation is down 0.8 ppts from before the pandemic and represents 1.4 million fewer people in the labor force compared to then despite having added 4.9 million jobs.

The underemployment rate, the broadest measure of unemployment, increased to 7.1% from 7.0% in November and is slightly above where it was in February 2020.

Monthly average hourly earnings growth was steady at 0.4%. Earnings growth year-over-year increased slightly to 4.1%, which was the pace of increase in October. Earnings growth remains strong by historical standards but has softened from a year ago.

2023 New-Vehicle Sales Were the Best Since Before COVID

December’s total new-light-vehicle sales were up 13.0% year over year, with one fewer selling day than December 2022. By volume, December new-vehicle sales were up 17.5% month over month. The December sales pace, or seasonally adjusted annual rate (SAAR), came in at 15.8 million, an increase of 16.8% from last year’s 13.5 million and up 3.2% from November’s unrevised 15.3 million pace.

December had the strongest SAAR since July and was assisted by strong and growing rental fleet sales. Combined sales into large rental, commercial, and government fleets increased 22% from a year ago. Sales into large rental fleets were up 72% year over year, while sales into commercial fleets were down 14%, and sales into government fleets were up 6%.

Including an estimate for fleet deliveries into dealer and manufacturer channels, the remaining retail sales were estimated to be up 12.9% from last year, leading to an estimated retail SAAR of 13.4 million, which was up 2.0 million from last year’s 11.4 million pace but up less significantly from November’s 13.0 million pace. The estimated fleet share of 16.1% was unchanged compared to last year but up from November’s share of 14.7%.

U.S. vehicle sales for the full year of 2023 hit their highest level since pre-COVID 2019 when the industry sold 17 million vehicles. The year 2023 was highlighted by much-improved production and inventory but also a six-week strike by the UAW against the Detroit 3. For the full year, sales reached 15.5 million vehicles, up 12% from 2022, a year hindered by the global computer chip shortage. Many car companies reported double-digit year-over-year sales gains, thanks to the unleashing of pent-up demand by retail and fleet buyers as production and inventory improved. The UAW strike had little impact on sales.

Average Transaction Price Dipped From a Year Ago; Incentives Rose

The average transaction price of a new vehicle in December increased 1.3% from November at an initial estimate of $48,759. The average price was down 2.4% from a year ago. Check back in the Newsroom later this week for additional data from Kelley Blue Book on average transaction prices.

The average price lost further ground on the average manufacturer’s suggested retail price (MSRP), declining to 98.0%, the lowest level since April 2021. The average MSRP increased 1.6% in December from November but was down 0.2% from a year ago.

The average amount spent by automakers on incentives increased 5.6% to $2,670, up 100% from a year ago. Incentives as a percentage of average transaction price increased to 5.5%, the highest level since July 2021.

Jonathan Smoke

Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.