- Job picture remains the bright spot of the economy, with low unemployment and high job creation.
- New- and used-vehicle sales disappoint in April on tight supply and production challenges.
- Wholesales used-vehicle values declined.
The April employment report showed stable job growth at 428,000 new jobs, and the unemployment rate was also unchanged at 3.6%. Labor force participation declined from what had been the highest level for the pandemic in March. Growth in average hourly earnings slowed.
Consistent with a strong labor market, continuing claims keep falling and are now at a 52-year low.
New-vehicle sales in April were down 2% from March and were down 19% from a year ago. The seasonally adjusted annual sales rate (SAAR) improved to 14.3 million from 13.4 million in March, as tight supply, record low incentives and worsening production challenges held back the usual seasonal gain.
In April, the used market also failed to see a big lift from more tax refunds. Our initial estimates indicate that used retail sales declined 13% in April from March and were down 21% from a year ago. Wholesale used car prices declined on a seasonally adjusted basis in April, as the month did not see quite the increase expected following a monster increase last April.
Tax refund season started slowly this year, but critical mass has finally been achieved, and more cash is coming in May. Through April 29, 71% of projected refunds for the year had been issued, when in 2019, 99% had been by the same week. However, the average refund is up 11% vs. 2019 and up 5% from a year ago to the highest refund ever recorded at this stage of tax refund season.
Job picture stays bright: Job growth was steady in April and better than expected. After revisions to March, the April tally of 428,000 jobs created matched the prior month. However, the last two monthly numbers were revised down for a net decline of 39,000 fewer jobs than initially estimated. Trade, transportation, and utilities had the largest gain of 104,000 jobs, and all major sectors gained over March. Auto dealers added 1,100 jobs, leaving employment down 75,900 or 5.8% below the February 2020 level. With the latest data, total payrolls are down by 1.2 million from February 2020.
The headline unemployment rate at 3.6% was unchanged from March, a new pandemic low and just 0.1 percentage points higher than the rate in February 2020. The labor force participation rate declined to 62.2% from 62.4% in March. Participation is down 1.2 percentage points from February 2020, representing 3.2 million fewer people in the labor force than in February 2020. The underemployment rate, the broadest measure of unemployment, increased to 7.0%, from 6.9% in March, which matched its level in January 2020. Average hourly earnings growth slowed to 0.3% in April from 0.4% in March, leaving earnings up 5.5% from a year ago.
As of April 23, 1.38 million people were on traditional unemployment benefits. That number was the lowest since January 1970, when the labor force was half as large. The broadest measure of continuing benefits declined to 1.48 million, which was 625,000 lower than the 2.10 million level before the pandemic. Initial claims increased from 19,000 to 200,000 in the latest week. Initial claims averaged 212,000 per week in 2020 in the weeks before the pandemic began.
April total new-light-vehicle sales were down 19% year over year, with one more selling day compared to April 2021. By volume, April new-vehicle sales were down 2% from March. The April SAAR was 14.3 million, a 22% decline from last year’s 18.3 million but up 7% from March’s 13.4 million pace.
Combined sales into large rental, commercial, and government buyers were up 4% in April compared with a year ago. Sales into rental were down 3% from a year ago, while sales into commercial fleets were up 15%, and sales into government fleets were down 4%. Including an estimate for fleet deliveries into the dealer and manufacturer channels, we estimate that the remaining retail sales were down 21% in April compared with a year ago, leading to an estimated retail SAAR of 12.3 million, which was down 23% from 16.0 million last April but up 6% from last month’s 11.6-million rate.
Tight supply and new challenges in production are limiting the growth in new-vehicle sales that would typically happen as the year progresses. Manufacturers’ incentive spending fell to an average of $1,315 in April, down 10.5% from March and down 59% from a year ago. The average transaction price exceeded the average MSRP for the eleventh month in a row in April.
We estimate that used retail sales declined 13% in April from March and failed to show the typical larger seasonal increase from tax refund season. These estimates indicate that used retail sales were down 21% from a year ago. CPO sales were down 14% in April compared with a year ago as sales declined 3% month to month.
Wholesale values decline: Wholesale used-vehicle values, according to the Manheim Used Vehicle Value Index, declined 1.0% in April on a seasonally adjusted basis. The decline left the Index at 221.2, up 14.0% from a year ago. The non-adjusted price change in April increased 2.9% compared to March, leaving the unadjusted average price up 16.4% from a year ago.
Manheim Market Report (MMR) values saw weekly price increases that were strongest to start April and slowed as the month progressed. Over the last four weeks, the Three-Year-Old Index increased a net 1.7%. All major market segments saw seasonally adjusted prices that were higher year over year in April. On a month-to-month basis, half of the major segments saw seasonally adjusted price declines, with compacts declining the most, and half of the major market segments saw price gains with sports cars increasing the most.
SAVE THE DATE: The annual Cox Automotive Mid-Year Review will be held on Tuesday, June 28. The Industry Insights team will host a conference call to review industry performance through the first six months of 2022, ahead of the first-half close, Friday, July 1.
Jonathan Smoke is the chief economist at Cox Automotive.