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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Job creation soars; jobless claims plummet.
  2. February new-vehicle sales were weaker than expected.
  3. The average tax refund is higher than a year ago.

The February employment report was stronger than expected as job creation accelerated to 678,000 jobs compared to 481,000 created in January, and prior months were revised up. Labor force participation grew to the highest level for the pandemic, and the unemployment rate fell to the lowest level for the pandemic.

Jobless claims are falling, and continuing claims are below where they were before the pandemic began. 

New-vehicle sales in February were up 6% from January but were down 12% from a year ago. The seasonally adjusted annual rate (SAAR) declined to 14.1 million from 15.0 million in January, as tight supply and record low incentives held back the usual seasonal gain. Manufacturers continue to prioritize retail over fleet, as sales into large rental buyers were down 52% in February from a year ago.

Tax refund season has started slowly this year. Through February 25, only 26% of projected refunds for the year have been issued, when in 2019 46% was disbursed by now. However, the average refund is up 13% versus 2019 and up 15% year over year to the highest refund ever recorded at this stage of tax refund season. That bodes well for the strength of the spring used-vehicle market, which is starting later than usual this year.

Job creation rises: The February employment report built upon the positive labor market trends evidenced in January. Job growth accelerated to 678,000 jobs created when 423,000 had been expected, and the prior two monthly numbers were revised up for a net increase of 92,000 more jobs than originally estimated.

Job creation in private payrolls accelerated. Government jobs increased from gains in education and in other local government jobs. Leisure and hospitality had the largest gain of 179,000 jobs. Auto dealers added 800 jobs, leaving employment down 88,000 or 6.7% below the February 2020 level. With the latest data, payrolls are down by 2.1 million from February 2020.

The impact of the omicron wave of COVID-19 was fading in February but still was elevated from late last year. The Bureau of Labor Statistics reported that 4.2 million people said they had been unable to work in mid-February because their employer closed or lost business due to the pandemic. That number was down 30% from the 6 million reported in January. However, 20% of those reporting not being able to work because of COVID received at least some pay from their employer for the hours not worked. The number of people reporting they were teleworking declined to 13.0% from 15.4% in January. It was 11.1% in December.

Unemployment falls: The headline unemployment rate declined to 3.8% in February, which was a new pandemic low and just 0.3 percentage points higher than the rate in February 2020. The labor force participation rate increased to 62.3% from 62.2% in January, which was a high for the pandemic but still down 1.1 percentage points from February 2020. The difference in labor force participation represents 2.9 million fewer people in the labor force compared to February 2020.

The underemployment rate, which is the broadest measure of unemployment, increased to 7.2%, from the pandemic low of 7.1% in January. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 14.2% in February from 14.7% in January, but remains above the 12.9% recorded in December 2021, which was the low for the pandemic. February’s share was just 0.5 percentage points higher than it was in February 2020.

Average hourly earnings were unchanged from January, leaving earnings up 5.1% from a year ago.

As of February 19, 1.48 million people were on traditional unemployment benefits. That number is now 239,000 lower than prior to the pandemic. The broadest measure of continuing benefits declined to 1.97 million, which was 132,000 lower than the 2.10 million level prior to the pandemic. Initial claims declined last week to 215,000, which is still higher than the level of new claims in December but lower than the peak in mid-January. Initial claims averaged 212,000 per week in 2020 in the weeks before the pandemic began.

Vehicle sales weak: Total light new-vehicle sales in February were down 12% from a year ago with the same number of selling days compared to last year. By volume, February new-vehicle sales were up 6% over January, but the February light vehicle SAAR was 14.1 million, which was down 11% from last year’s 15.9 million and 6% lower than January’s 15.0 million rate.

Combined sales into large rental, commercial, and government buyers were down 30% year over year in February. Sales into rental were down 52% from a year ago, while sales into commercial and government fleets had modest year-over-year gains of 1% and 8%, respectively.

Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were down 8% year over year in February, leading to an estimated retail SAAR of 12.2 million, which was down 8% from 13.2 million last February and last month’s 13.2-million rate. Tight supply and limited improvement in production is limiting the growth in new-vehicle sales that would typically happen as the year progresses.

Incentive spending fell to an average of $1,654 per vehicle in February, down 8.5% from January and down 51.8% from a year ago.

The next Auto Market Report video will be published on Smoke on Cars on Tuesday, March 15.

Save the date: The Q1 2022 Cox Automotive Industry Insights and Sales Forecast Webcast will be held on Monday, March 28, 1 p.m. EDT. RSVP to attend.

Jonathan Smoke is the chief economist at Cox Automotive.

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