Auto Market Weekly Summary

The new-vehicle market lost more momentum in June as the market is past the spring frenzy and is now seeing sales fall with even tighter supply and record-high prices with limited incentives. Still, June retail sales were still close to the level recorded in June 2019, so the pace is relatively strong considering the conditions.

June saw an acceleration in new jobs. The headline unemployment rate ticked higher, but the real rate was likely unchanged, and the underemployment rate fell to a new low 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 fast pace especially since most jobs being created are lower-wage jobs.

June saw mixed signals in consumer confidence and sentiment. The most reliable sentiment data suggest a cooling in the recovery of sentiment as consumers deal with rising concerns about the Delta variant of COVID-19 and grapple with higher prices for most goods and services.

Vehicle sales rise: Total new-vehicle sales were up 18% in June from a year ago with the same number of selling days compared to June 2020. The June SAAR was 15.4 million vehicles, an 18% increase from last year’s 13.0 million but a 9.4% decline from May’s 17.0 million SAAR. The June SAAR was 10.4% lower than June 2019’s 17.2 million rate.

Combined sales into large rental, commercial, and government buyers were up 63% from a year ago. Sales into rental fleets were up 531% from a year ago but remain down 3% for the year to date. Sales into commercial fleets gained 13% from a year ago and are up 27% year to date.

Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were up 15% year-over-year, leading to an estimated retail SAAR of 13.4 million vehicles which was up from 11.6 million in June 2020 but down from 13.6 million in June 2019.

Employment improves: The employment recovery accelerated in June, but the headline unemployment rate ticked up instead of declining. June saw 850,000 jobs created when 720,00 had been expected, and the prior two monthly numbers were revised up for a net increase of 15,000 more jobs than originally estimated.

June saw large gains again in service sectors like education, healthcare, trade and transportation, and professional and business services. State and local governments also saw large gains. Leisure and hospitality again outpaced all other sectors by adding 343,000 jobs. Auto dealers added 7,500 jobs, which left dealership employment 4.3% below the February 2020 level.

The headline unemployment rate increased to 5.9% in June from 5.8% in May. However, the Bureau of Labor Statistics reported that the rate could have been 0.2 points higher if not for misclassification due to confusion about people considered as employed but away from work. This misclassification error rate declined 0.1 points from May, so the likely true headline unemployment rate in June was unchanged from May.

The labor force participation rate was unchanged at 61.6%. The underemployment rate, which is the broadest measure of unemployment, declined to 9.8%, which was the lowest rate yet for the pandemic, but it is 2.6 percentage points higher than it was in June 2019. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 19.1% in June from 19.6% in May. While that number is also at a low for the pandemic, it remains 4.8 percentage points higher than it was in June 2019.

Average hourly earnings increased 0.3% in June after increasing 0.4% in May. Average hourly earnings were up 3.6% year over year. This level of increase is high especially since most jobs being created are in lower-paying service sector jobs.

The latest traditional continuing claims data from the week ending June 19 increased by 56,000 and remains elevated at 3.47 million. The broadest measure of continuing claims, which includes pandemic unemployment assistance, declined by 181,000 to 14.7 million in the latest data. Initial claims for the week ending June 26 declined by 51,000 to 364,000 claims, which was the lowest level yet during the pandemic. Initial claims averaged 212,000 per week in 2020 prior to the pandemic

Consumer confidence mixed: Consumer Confidence, according to the Conference Board, increased 6.1% in June and left confidence down just 4% compared to February 2020. Plans to purchase a vehicle in the next six months improved modestly but remains down year-to-year. Plans to purchase a home also improved in June but remain down year over year.

The index of consumer sentiment from Morning Consult did not reflect similar improvements in June. That index failed to see any stretch of consistent gains and ended the month down 0.6% from May, which ended down 0.9% from April. The index did see a slight decline week to week. The Morning Consult Index ended June down 12.1% from February 29, 2020. This index is timelier, representing the full month each month, and it is based on a much larger sample of consumers.

The Q2 Manheim Used Vehicle Value Index call, hosted by Jonathan Smoke, is Thursday, July 8 at 11 a.m. EDT. Register to attend. Also, an Auto Market Report video will be published in Smoke on Cars on Wednesday, July 7.