- Job picture mixed with disappointing job creation but lower unemployment.
- New vehicle sales improved in December but still weak due to low inventory.
- New vehicle prices close year at record levels; incentives drop to 20-year low.
The December job report was mixed as it similarly was in November. Again, job creation was disappointing with just 199,000 new jobs, but the unemployment rate fell to 3.9% with some growth in the labor force. Tight labor supply is limiting job growth.
Wages saw a stronger month-to-month growth pace, but, year over year, the pace of growth slowed. Jobless claims are now close to or below what they were before the pandemic began, depending on the metric.
New-vehicle sales volume improved in December, but the seasonally adjusted annual rate (SAAR) of sales declined as a tight supply prevented the jump in new vehicle sales we usually see in December. Prices continue to rise to new records.
Mixed job report: December saw a disappointing deceleration of job gains with only 199,000 jobs created when 450,000 had been expected. But the prior two monthly numbers were revised up for a net increase of 141,000 more jobs than originally estimated. Job creation in private payrolls slowed, and job losses in government again pulled down the totals. Leisure and hospitality had the largest gain of 53,000 jobs. Auto dealers shed 2,100 jobs, leaving employment down 63,100 or 4.8% below the February 2020 level.
The headline unemployment rate declined to 3.9% in December from 4.2% in November. However, the Bureau of Labor Statistics reported that the rate could have been 0.1 points higher if not for misclassification due to confusion about people considered as employed but away from work. This error rate was unchanged from November, so the likely true headline unemployment rate in December was indeed lower.
The labor force participation rate was unchanged from an upwardly revised 61.9% for November, which was a high for the pandemic but still down 1.5 percentage points from February 2020. The underemployment rate, which is the broadest measure of unemployment, declined to 7.3%, which was the lowest rate yet for the pandemic, and it is now just 0.5 percentage points higher than it was in December 2019. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent was unchanged in December at 12.9%. That number is 1.3 percentage points lower than it was in December 2019.
Average hourly earnings increased 0.6% in December, which was the strongest monthly increase since April 2021. Average hourly earnings were up 4.7% year over year, which was a decline from the upwardly revised 5.1% year-over-year pace in November.
As of Dec. 25, 1.75 million Americans remained on traditional unemployment benefits, which are limited to at most six months of coverage. That number is now only 39,000 higher than prior to the pandemic. The broadest measure of continuing benefits declined to 1.72 million as all pandemic assistance numbers are no longer being reported. That number is now 381,000 lower than the 2.10 million level prior to the pandemic. Initial claims increased last week to 207,000 in the seasonally adjusted number, which is lower than the 212,000 average in 2020 in the weeks before the pandemic began.
New-vehicle sales drop: Total new-vehicle sales in December were down 26% from a year ago, with one more selling day compared to the previous year. The December SAAR was 12.4 million, down from the 12.9-million pace in November and down 24% from December 2020’s 16.3 million and 27% lower than December 2019’s 16.9 million rate.
Combined sales into large rental, commercial, and government buyers were down 32% from a year ago in December. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were down 23% from a year ago, leading to an estimated retail SAAR of 11.0 million, which was down from 11.1 million in November and down from 13.9 million in December 2020 and down from 13.6 million in December 2019.
For the full year, new-vehicle sales came in at about 15 million units.
Vehicle prices rise: The new-vehicle average transaction price (ATP) increased 1.7% in December to $47,077, which was a new record. [More details on ATP will be published later this week]. The average incentive declined to $1,816, which was at least a 20-year low. As a result, the average incentive as a percent of the average price fell to an all-time low of 3.9%.
Used-vehicle sales slip: We initially estimate that total used-vehicle sales were down 4% from a year ago in December. Compared to 2019, total used-vehicle sales were down 6%. The December used SAAR was 39.1 million, which was down 4% from 40.6 million in 2020 and unchanged from November. The December used retail SAAR estimate was 20.4 million, down 5% from 21.5 million from 2020 and unchanged from November.
Certified pre-owned (CPO) sales declined 19% from a year ago in December but were up 3% from November. CPO sales ended the year up 5% against last year but down 2% compared to 2019.
Wholesale used-vehicle values, according to the Manheim Used Vehicle Value Index, increased 1.6% in December, leaving values up 47% from a year ago. The non-adjusted price change in December was a decline of 1.1% compared to November, leaving the unadjusted average price up 43% year over year.
UPCOMING EVENT – January 13, 2 p.m. EST
Join Cox Automotive Chief Economist Jonathan Smoke, Senior Economist Charlie Chesbrough, and the Industry Insights team for a special webcast – Cox Automotive Industry Insights 2022 – an expanded quarterly update.
As a new year dawns for the automotive industry, this webcast will kick off with Cox Automotive data and insights on both the new- and used-vehicle markets for 2021. The team will also reveal 2022 forecasts and some predictions and trends to watch in the year ahead.
The next Auto Market Report video will be published in Smoke on Cars on Tuesday, January 18.
Jonathan Smoke is the chief economist for Cox Automotive.