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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Job growth reaccelerated to stronger-expected heights in January.
  2. The new-vehicle sales pace declined to the slowest since March 2023.
  3. Consumer confidence rose in January.

Job growth in January reaccelerated and was much stronger than expected, plus prior months were revised up. The three-month average for job creation increased to the highest level in nine months, casting doubt on the thesis that job growth is slowing. The unemployment rate and labor force participation were steady as wage inflation accelerated. 

The pace of new-vehicle sales decreased in January to its slowest since last March as harsher winter weather disrupted sales in what is typically the lightest month of the year. We will have more insights next week as we see what happened with pricing and incentives. 

Most measures of consumer confidence and sentiment show gains in January, and all measures are up year over year.

Job Growth Reaccelerated To Stronger-Than-Expected Heights in January

Job growth in January reaccelerated and was much stronger than expected, while prior job numbers were revised up.

January saw 353,000 jobs created when 185,000 had been expected. The prior two months were revised up for a net increase of 126,000 more jobs than originally estimated.

The private sector created 317,000 jobs in January. Manufacturing saw 23,000 new jobs. Services produced 289,000 new jobs. Education and health care had the largest gain in the private sector, with 112,000 jobs created, an acceleration from 84,000 created in December. Auto dealers added 1,800 jobs, which left employment at dealers down 16,600 or 1.3% below the February 2020 level. Total payrolls now exceed February 2020 payrolls by 5.4 million or 3.5%.

The three-month moving average of new jobs, a reliable momentum indicator, is now 289,000, which is the fastest pace in nine months.

The labor market continues to be more resilient than expected. The “soft landing” could turn into a “no landing” scenario. Based on the revised estimates, 2023 saw 3.1 million new jobs created. Job growth in 2024 is expected to slow to about half of the growth in 2023, but the January report challenges the slowing thesis.

Unemployment Rate Holds Steady at 3.7%

The headline unemployment rate was steady at 3.7%. The labor force participation rate was also steady at 62.5%. Participation is down 0.8 ppts from before the pandemic and represents 2.1 million fewer people in the labor force compared to then despite having added 5.4 million jobs.

The underemployment rate, the broadest measure of unemployment, increased to 7.2% from 7.1% in December and is slightly above where it was in February 2020. Monthly average hourly earnings growth accelerated to 0.6% from 0.4% in December.

Earnings growth year-to-year increased to 4.5% from an upwardly revised 4.3% in December. Earnings growth remains strong by historical standards and no longer appears to be slowing.

January New-Vehicle Sales Pace Declined to the Slowest Since March 2023

Total new-light-vehicle sales were up 2.8% in January compared with a year ago, with one more selling day than January 2023. By volume, new-vehicle sales were down 26.2% from December. January is typically the lowest volume month of the year. December is one of the highest.

The January seasonally adjusted annual rate (SAAR) was 15.0 million, a 0.7% decline from last year’s 15.1 million and down 6.9% from December’s upwardly revised 16.1 million. January had the weakest SAAR since last March and was likely impacted by weather disruptions in much of the country for part of the month.

Sales into fleets saw much weaker year-over-year gain than we saw for most of the last year. Combined sales into large rental, commercial, and government fleets were up 3.1% from a year ago. Sales into large rental fleets were up 20% from a year ago. 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 4.1% from last year, leading to an estimated retail SAAR of 12.3 million, which was down 0.1 million from last year’s 12.4 million pace and down from December’s 13.4 million pace. The estimated fleet share of 16.8% was down 1 percentage point compared to last year.

Consumer Confidence Made Gains in January

The Conference Board Consumer Confidence Index® increased 6.3% in January, as views of the present situation jumped 9.6% to the highest level since March 2020. Consumer confidence was up 8.3% from a year ago.

Plans to purchase a vehicle in the next six months declined to the lowest level since April and was down from a year ago.

Consumer sentiment, according to the sentiment index from the University of Michigan, also increased in January. The Michigan index increased 13.3% for the month and was up 21.7% from a year ago. Consumer expectations for inflation in a year declined to 2.9%, which was the same expectation for five years.

The consumer’s view of buying conditions for vehicles increased to the highest level since the summer of 2021 as views of prices and interest rates were less negative.

The daily index of consumer sentiment from Morning Consult changed little but went down in January and left the daily index up 12.6% from a year ago. The daily index declined 0.6% from the end of December. Gas prices increased in January. According to AAA, the national average price for unleaded gas increased 1.3% to $3.15 per gallon as of January 31, down 10% from a year ago.

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.

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