- Jobs recovery shifted into reverse on peak COVID-19 cases; further job losses expected.
- New-vehicle sales close 2020 on a higher note.
- Consumer sentiment climbed on stimulus package but could fade due to political turmoil.
Last week saw continued growth in COVID-19 cases. We are likely to hit new records and an eventual peak in daily cases in the next seven to 10 days.
The rise in COVID-19 cases in December resulted in job losses for the month, mostly in the service sector. More job losses are expected until we get past the peak in cases. A consistent job recovery is not likely to happen until the COVID-19 risk is reduced from broad vaccinations.
Consumer sentiment was on an upward trend following the passage of the $900-billion stimulus package on December 28, but last week’s unrest at the Capitol caused some momentum to fade. Retail vehicle sales saw a strong end of December. Used-vehicle values declined in December.
More jobs lost: The jobs recovery shifted into reverse in December as peak COVID-19 cases, hospitalizations and deaths caused declines in service sector jobs. December saw 140,000 jobs lost compared to November. However, the prior two monthly numbers were revised up for a net increase of 135,000 more jobs than originally estimated. The largest declines in December were in leisure and hospitality, government, education and health services, and other services. Auto dealers recovered 13,400 jobs, so dealership employment is now 5.3% below last February’s employment level.
The headline unemployment rate remained steady at 6.7% in December. However, the Bureau of Labor Statistics reported that the rate could have been 0.6 points higher if not for misclassification due to confusion about people considered as employed but away from work. This misclassification error rate increased by 0.2 points from November, so the real unemployment rate including this factor likely increased in December.
The underemployment rate, which is the broadest measure of unemployment declined to 11.7% from 12.0% in November. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, increased to 28.3%. The number of permanently unemployed declined by 348,000 in December.
The latest continuing claims data from the week ending December 26 saw a decline of 126,000 claims. However, part of that decline reflects traditional state unemployment benefits ending for those who reached the end of their maximum of six months of coverage. The broadest measure of continuing claims, which includes pandemic unemployment assistance, has 19.2 million still on unemployment benefits. Initial claims for the week ending January 2 declined slightly to 787,000, which was the smallest level of new claims in five weeks. However, the New Year holiday likely disrupted filings.
Given the upward trend in COVID-19 cases is leading to more restrictions and reduced activity, we are likely to see initial claims return to an increasing trend over the next several weeks.
New-vehicle sales improve: Vehicle sales saw an improving trend in December. Total new-vehicle sales were up 6.4% from a year ago with three more selling days compared to December 2019. The December SAAR was 16.3 million vehicles, a 3% decrease from last year’s 16.8 million but a 6% increase from November’s 15.6 million.
Combined sales into large rental, commercial, and government buyers were down 25% year-over-year in December. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail deliveries were up 12% in December from the previous year, leading to an estimated retail SAAR of 14.2 million, which was up from 13.9 million last December and up from November’s 13.4 million.
New-vehicle inventories dipped slightly in December and came in around 2.7 million units, which was down 22% from December 2019. New-vehicle sales in 2020 were 14.5 million and down 15% from 2019.
Used-vehicle sales dip: We initially estimate that used-vehicle sales were down 5% from a year ago in December. The December used SAAR was 38.0 million, down from 40 million last December but up from November’s 37 million. The December used retail SAAR estimate was 20.2 million, down from 20.8 million last year but up month-to-month from November’s 19.6. Our initial estimates show used sales of 36.7 million in 2020, down 8% from a year ago. Retail used sales were 19.5 million and down 6%. CPO sales in December declined 2% year-over-year but were up 24% month-to-month and ended 2020 down 7%.
MUVVI declines: The Manheim Used Vehicle Value Index (MUVVI) declined 0.59% month over month in December. The decline brought the Index to 161.1, which was a 14.2% increase from a year ago. On a year-over-year basis, most major market segments saw seasonally adjusted increases in December. Pickups and luxury cars again outperformed the overall market.
Consumer sentiment gains: The index of consumer sentiment from Morning Consult had been showing solid gains since the massive stimulus package was signed into law at the end of December, but it lost some ground following last week’s events at the Capitol. The index remains up 0.7% week over week. It is now down by 5.3% compared to the end of October and down 23% compared to the end of February.
Check back on Smoke on Cars for a video that will include updated data.