- Employment picture brightens; consumer sentiment best in a year.
- New-vehicle sales lost momentum due mostly to stormy weather.
- Spring bounce has arrived for used vehicles.
The downward trend in new daily COVID-19 cases continues, and the vaccine rollout is accelerating. Improving conditions are leading to rollbacks of restrictions, and employment data are starting to reflect solid job gains as a result.
Jobs recovery resumes: February saw 379,000 new jobs – twice what was expected, triggering another tick down in the unemployment rate. It was the best monthly gain in jobs since October 2020.
New jobless claims are now lower than the levels seen in the fall before the third wave of COVID-19 cases began. The number of people on unemployment benefits is declining, but we still have 18 million on some form of benefits. The job increases in February were primarily in accommodations and food services, professional and business services, education and health services, and retail trade. Auto dealers added 3,600 jobs, which left dealership employment 5.8% below the year-ago level.
The headline unemployment rate declined to 6.2% in February. However, the Bureau of Labor Statistics reported that the rate could have been 0.5 points higher if not for misclassification due to confusion about people considered as employed but away from work. This misclassification error rate declined from January, so the headline unemployment rate did see a real decline.
The labor force participation rate was unchanged in February, which means that the decline in the unemployment rate was a result of a gain in jobs. The underemployment rate, which is the broadest measure of unemployment was unchanged at 11.1%. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 22.4%, which was the lowest level in a year. The number of permanently unemployed declined by 6,000 in February.
The latest traditional continuing claims data from the week ending February 20 fell 124,000, but that week’s numbers were likely impacted by the winter storms. The broadest measure of continuing claims, which includes pandemic unemployment assistance, has 18 million still on unemployment benefits in the latest data. Initial claims for the week ending February 27 increased by 9,000 to 745,000 claims, as the prior week’s numbers dipped in part because of the winter storms. That level is now lower than the average weekly new claims of 765,000 across October and November.
Given the downward trends in COVID-19 cases and the accelerating rollout of vaccines are leading to relaxed restrictions in many states, initial claims will likely decline in future weeks.
New-vehicle sales dip: Vehicle sales in February lost momentum, but the declining trend was mainly a result of severe weather disrupting sales in the middle of the month. Tight supply, low incentives, and record prices were also factors.
Total new-vehicle sales were down 12.6% in February with two fewer selling days compared to February 2020. The February SAAR was 15.7 million, a 6.5% decrease from last year’s 16.8 million and a 5.4% decrease from January’s 16.6 million.
Combined sales into large rental, commercial, and government buyers were down 36% from a year ago. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were down 5% from a year ago, leading to an estimated retail SAAR of 13.0 million, which was up slightly from 12.8 million last February but down from January’s 14.0 million.
New-vehicle inventories declined in February, coming in at about 2.6 million units, which was down 26% from February 2020. Average incentives declined to $3,430, which was down 12% year-over-year. Incentives as a percent of average transaction prices fell to 8.4%, which was the lowest level since April 2015.
Used vehicles bounce: The traditional “spring bounce” in used vehicle values started early this year and accelerated in February. The seasonally adjusted Manheim Used Vehicle Value Index increased 3.8% in February. The increase brought the Index to 169.2, which was a new record and 17.9% higher than a year ago. On a year-over-year basis, all major market segments saw seasonally adjusted increases in February, but pickups again outperformed the overall market. The weekly price data indicate an acceleration in price gains as February ended. .
We initially estimated that used-vehicle sales were down 3% in February compared with a year ago. The February used SAAR was 38.0 million, down from 39.4 million last February but essentially unchanged from January’s 38.1 million. The February used retail SAAR estimate was 20.8 million, down from 20.9 million last year but unchanged from January. CPO sales in February declined 12% year over year but were up 4% from January.
Consumer confidence rises: Consumer sentiment increased again over the seven days ended Friday, March 5. The daily index of consumer sentiment from Morning Consult gained more ground again last week as sentiment seems to be improving with the vaccine rollout. The index was up 1.3% week over week as of Friday, March 5, and is now up by 2.6% compared to the end of September and at the highest level since March 19, 2020.
Check back on Smoke on Cars for a video that will include updated data.