Auto Market Weekly Summary

Highlights:

• Job growth in July was weaker than expected, with only 114,000 jobs created rather than the expected 175,000.
• The Federal Reserve maintains the rate policy at its current high level, despite worsening job market conditions.
• New-vehicle sales in July saw a decrease of 2.0% year over year and a decrease of 3.0% month over month.

A Closer Look at the Job Market

The job market in July saw a significant slowdown in growth. There were 114,000 new jobs created, far short of the anticipated 175,000. This resulted in an increase in the underemployment rate, the broadest measure of unemployment, which rose to 7.8%. This is 0.8 percentage points higher than the rate in February 2020. The headline unemployment rate increased to 4.3% from 4.1%, also a 0.8 percentage point increase. The July increase triggered the Sahm Rule, which suggests a recession could already be underway due to the deterioration in the labor market.

• There was a net decline of 29,000 jobs over the last two months.
• The private sector contributed to 97,000 new jobs, while the government added 17,000.
• Services produced 72,000 jobs.
• Education and health care again had the largest gain in the private sector with 57,000 jobs created, which was down from 79,000 created in June.
• Auto dealers added 4,900 jobs, which left their employment down 4,000, or 0.3%, from the February 2020 level.
• Manufacturing added 1,000 jobs following a downwardly revised decline of 9,000 in June.

The Federal Reserve’s Position

The Fed has been describing the labor market trends as normalizing, but the metrics suggest that conditions are worse than before the pandemic and continue to deteriorate. Despite worsening job market conditions, the Federal Reserve maintains its rate policy at a high level. The Fed’s focus is to achieve a 2% target on core personal consumption expenditures (PCE), which stood at 2.6% in June.

• Unemployment rate measures are currently worse now than before the pandemic and continue to deteriorate.
• There is an increase in the number of job losses, driven by a higher-than-normal layoff pace.
• The market is currently anticipating that the Fed will need to be more aggressive in cutting rates when they do start.

New-Vehicle Sales Analysis

July saw new-vehicle sales decrease 2.0% year over year and decrease 3.0% month over month despite having the same number of selling days as July 2023.

• The July seasonally adjusted annual rate (SAAR) was 15.8 million, down 0.8% from the previous year.
• The July SAAR was up 4.2% from June’s downwardly revised 15.2 million, which was impacted by the CDK software disruption. At this point it appears that July did not see a full recovery of the disrupted/lost sales in June.
• The SAAR year to date remains 15.5 million, which was the total for last year, but YTD last year as of July was 15.4 million.
• Sales saw a decline into fleet relative to the overall market, with a 14% year-over-year decrease.
• Sales into large rental fleets were down 30.5% year over year, while sales into commercial fleets were down 4.2%.

Jonathan Smoke

Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.