- Jobs picture brightened in July.
- New-vehicle market lost momentum.
- Consumer sentiment faded as COVID-19 cases climbed.
July saw further strong gains in jobs with 943,000 created. The headline unemployment rate and the underemployment rate fell to new lows for the pandemic. New jobless claims also fell again last week, and continuing claims fell in the latest data as well. Average hourly earnings are growing at a fast pace especially since most jobs being created are lower-wage jobs.
The new-vehicle market lost more momentum in July as the market contends with extremely low inventory and record-high prices with limited incentives. The used retail market held up better in July and is better positioned to remain strong because of the supply challenges in new vehicles. Demand for used vehicles will also remain strong because prices have rolled over with wholesale prices falling 2.6% in July.
Sentiment continues to fade as COVID-19 cases due to the Delta variant continue to climb to levels last seen in February.
Job situation improves: July saw 943,000 jobs created when 870,00 had been expected, and the prior two monthly numbers were revised up for a net increase of 119,000 more jobs than originally estimated. July saw large gains again in service sectors like education, healthcare, transportation, and professional and business services. State and local governments also saw large gains in education. Leisure and hospitality again outpaced all other sectors by adding 380,000 jobs. Auto dealers lost 3,600 jobs, which left dealership employment 4.8% below the February 2020 level.
The headline unemployment rate declined to 5.4% in July from 5.9% in June. However, the Bureau of Labor Statistics reported that the rate could have been 0.3 points higher if not for misclassification due to confusion about people considered as employed but away from work. This misclassification error rate increased 0.1 points from June, but the likely true headline unemployment rate in July was likely still lower than June.
The labor force participation rate increased slightly to 61.7%. The underemployment rate, which is the broadest measure of unemployment, declined to 9.2%, which was the lowest rate yet for the pandemic, but it is 2.3 percentage points higher than it was in July 2019. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 14.2% in July from 19.1% in June. That number is a low for the pandemic, and it is only 0.1 percentage points higher than it was in July 2019.
Average hourly earnings increased 0.4% in July following the same increase in June. Average hourly earnings were up 4% from a year ago. 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 July 24 declined by 366,000 as the end of enhanced unemployment benefits in some states is leading to larger declines. The broadest measure of continuing claims, which includes pandemic unemployment assistance, declined by 181,000 to 13.0 million in the latest data. Initial claims for the week ending July 31 declined by 14,000 to 385,000 claims.
New-vehicle sales slow: Total new-vehicle sales slowed in July and were up only 4% from a year ago with one more selling day compared to last year. The July SAAR was 14.8 million, up only 1% from last year’s 14.6 million and 13% lower than that of July 2019’s 17.0 million rate.
Combined sales to large rental, commercial, and government buyers were up 11% from a year ago. Sales into rental companies rose 248% from 2020. Sales into commercial fleets were down 11% from a year ago. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were up 5% year-over-year, leading to an estimated retail SAAR of 13.1 million, which was up from 13.0 million in July 2020 but down from 14.4 million in July 2019.
Used-vehicle sales fall: We initially estimate that used vehicle sales were down 15% in July compared with a year ago as this July was up against the strongest month for used sales during the initial reopening phase of the pandemic last year. Compared to 2019, total used vehicle sales were down 3.4%.
The July used SAAR was 38.5 million, which was down from 44.8 million last year and down from June’s 39.0 million rate. The July used retail SAAR estimate was 21.5 million, down from 23.7 last year but up from June’s 21.3 million rate. The July 2019 retail SAAR was 21.1 million, so the rate this July was 4% higher.
The Manheim Used Vehicle Value Index declined 2.6% from June to July, leaving the index up 23.6% year-over-year. On a month-over-month basis, all major market segments saw declines in July, with pickup trucks declining the most and sports cars declining the least.
Certified pre-owned sales declined 2% from a year ago but were up 4% June to July. CPO sales are up 15% for the year so far compared to the same timeframe last year, and sales for the month were up 5% compared to 2019.
Consumer sentiment slides: The daily measure of consumer sentiment from Morning Consult declined in each of the last five days ending Friday, August 6, leaving the index down 1.5% over the previous seven days and month to date.