- The headline unemployment rate and the underemployment rate both fell to new lows for the pandemic.
- The new-vehicle market lost some momentum in May from April’s upwardly revised and incredible 18.8 million SAAR.
- Consumer sentiment declined modestly in May and has declined slightly again to start June.
May saw 559,000 new jobs created but 675,000 had been expected. The headline unemployment rate and the underemployment rate both fell to new lows for the pandemic. New jobless claims also fell again last week to their lowest level for the pandemic. Average hourly earnings are growing at a solid pace even though the majority of jobs being created are lower-wage jobs.
The new-vehicle market lost some momentum in May from April’s upwardly revised and incredible 18.8 million seasonally adjusted annual rate (SAAR). Sales into fleet were much stronger in May than we have been seeing thus far this year, but fleet sales remain down year to date.
Despite continued declines in daily COVID-19 cases and an improving economy, consumer sentiment declined modestly in May and has declined slightly again to start June.
Employment Continues Slow Recovery: The employment recovery continued in May but again delivered disappointing growth in jobs. May saw 559,000 jobs created when 675,00 had been expected. However, the prior two monthly numbers were revised up for a net increase of 27,000 more jobs than originally estimated. May saw mostly gains in services sectors like education, healthcare, trade and transportation, and professional and business services. Leisure and hospitality again outpaced all other sectors by adding 292,000 jobs. Auto dealers added 1,800 jobs, which left dealership employment 4.9% below the February 2020 level.
Unemployment Rate and Jobless Claims Decline in May: The headline unemployment rate declined to 5.8% in May from 6.1% in April. The labor force participation rate declined 0.1% in May to 61.6%. The underemployment rate, which is the broadest measure of unemployment, declined to 10.2%, which was the lowest rate yet for the pandemic, but it remains 3 percentage points higher than it was in May 2019. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 19.6% from 21.5% in April. While that number is also at a low for the pandemic, it remains 5.2 percentage points higher than it was in May 2019.
Average hourly earnings increased 0.5% in May after increasing 0.7% in April. Average hourly earnings were up 2.0% year over year. This level of increase seems low, but since the majority of jobs being created are in lower paying service sector jobs, this level of average increase is actually quite strong.
The latest traditional continuing claims data from the week ending May 22 increased by 169,000 and remains elevated at 3.77 million. The broadest measure of continuing claims, which includes pandemic unemployment assistance, declined by 366,000 to 15.4 million in the latest data. Initial claims for the week ending May 29 declined by 20,000 to 385,000 claims, which was the lowest level yet during the pandemic. Initial claims averaged 212,000 per week in 2020 prior to the pandemic.
New-vehicle Market Loses Some Momentum; Fleet Sales Stronger in May: Total new vehicle sales were up 41% year over year in May with the same number of selling days compared to May 2020. The May SAAR was 17.0 million, a 40% increase from last year’s 12.1 million but a 9.6% decline from April’s upwardly revised 18.8 million SAAR. The May SAAR was also lower than May 2019’s 17.3 million rate.
Combined sales into large rental, commercial, and government buyers were up 222% year over year in May. Sales into rental were up 363% year over year but remain down 13% year to date. Sales into commercial fleets gained 193% in May and are up 30% year to date.
Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were up 33% year over year in May, leading to an estimated retail SAAR of 14.9 million, which was up from 11.2 million in May 2020 and up from 13.5 million in May 2019.
Consumer Sentiment Loses Ground: The Index of Consumer Sentiment from Morning Consult ended May down 0.9% from where it ended April. Sentiment has drifted down an additional 0.4% to start June as of Friday, June 4.
An Auto Market Report video will be published in Smoke on Cars on Tuesday, June 8. Also, the Mid-Year Review, hosted by Jonathan Smoke and the Industry Insights team, is scheduled for Monday, June 28.