- Jobs see only meager gains; more drop out of workforce.
- New-vehicle sales were better than expected.
- Used-vehicle prices starting the spring bounce.
The downward trend in new daily COVID-19 cases continues. Improving conditions are leading to rollbacks of restrictions. Economic activity and employment should improve as a result.
Job gains small: January only saw meager gains in jobs, but the declining trend in jobless claims affirm that January likely represented the transition from the worst of the winter.
The jobs recovery shifted into reverse in December as peak COVID-19 cases, and hospitalizations caused more restrictions and declines in service sector jobs. With revised data, December saw 227,000 jobs lost compared to November. January saw a slight gain of 49,000, which was less than half of the expected gain. The latest data reflected revisions to employment numbers for 2020, and the prior two monthly numbers were revised down for a net decline of 159,000 fewer jobs than originally estimated.
The increases in January were primarily in professional and business services and state and local government and especially education. Auto dealers shed 2,800 jobs, which left dealership employment 5.9% below February’s employment level.
Unemployment rate dips: Unemployment fell in January as more people dropped out of the labor force. The number of people on unemployment benefits is declining, but we still have 17.8 million Americans on some form of benefits.
The headline unemployment rate declined to 6.3% in January. 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 was unchanged from December, so the headline unemployment rate did see a real decline.
The decline was primarily driven by Americans dropping out of the labor force. The underemployment rate, which is the broadest measure of unemployment declined to 11.1% from 11.7% in December. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 27.1%. The number of permanently unemployed declined by 133,000 in January.
The latest traditional continuing claims data from the week ending Jan. 23 saw a decline of 193,000 claims. The broadest measure of continuing claims, which includes pandemic unemployment assistance, had 17.8 million people still on unemployment benefits. Initial claims for the week ending Jan. 30 declined by 33,000 to 779,000, which was the smallest level of new claims in 9 weeks and is trending closer to the average weekly new claims of 765,000 across October and November.
Given that downward trends in COVID-19 cases and hospitalizations are leading to relaxed restrictions in many states, initial claims will likely continue to decline over the next several weeks.
Good vehicle sales: New-vehicle sales in January were better than expected and better than December. Retail used-vehicle sales also improved in January.
Total new-vehicle sales were down 3.7% in January from the year earlier with one fewer selling day compared to January 2020. The January SAAR was 16.6 million vehicles, a decrease from 2019’s 16.9 million but an increase from December 2020’s 16.2 million.
Combined sales into large rental, commercial, and government buyers were down 26% in January from a year earlier. Including an estimate for fleet deliveries into the dealer and manufacturer channel, the remaining retail deliveries were estimated to be up 3% year-over-year in January, leading to an estimated retail SAAR of 14.0 million, which was up from 13.3 million last January but down from December’s 14.1 million.
New-vehicle inventories increased slightly in December, coming in around 2.8 million units, down 21% from January 2020.
Used spring bounce arrives: With strong and growing retail demand and tight supply, the traditional “spring bounce” in used-vehicle values has arrived. The seasonally adjusted Manheim Index increased 1.2% in January, leaving the index up 15.1% year over year.
Cox Automotive initially estimate that used-vehicle sales were down 5% year-over-year in January. The January used SAAR was 38.1 million, down from 40.1 million last January but essentially unchanged from December’s 38 million. The January used retail SAAR estimate was 20.8 million, down from 21.2 million in 2020 last year but up slightly month-to-month from December’s 20.2 million. CPO sales in January declined 7% year over year and 13% month to month.
The Manheim Used Vehicle Value Index increased 1.2% in January from December. The increase brought the Index to 163.0, which was a 15.1% increase from a year ago. On a year-over-year basis, most major market segments saw seasonally adjusted increases in January, but pickups and luxury cars again outperformed the overall market. The weekly price data indicate an early start in January to the traditional spring bounce, which is usually driven by tax refunds, but this year is being assisted by stimulus as well.
Consumer sentiment dips: Consumer sentiment declined modestly, after improving. The index of consumer sentiment from Morning Consult lost some ground again last week. The index is down 0.2% week-to-week and is now down by 2.4% compared to the end of October and down 20.6% compared to the end of February.
Check back on Smoke on Cars for a video that will include updated data.