Auto Market Weekly Summary: September 6

Job growth decelerated in August and was close to expectations, especially with downward revisions to prior reported payrolls. The headline unemployment rate increased to 3.7% in August and is now again higher than the pre-pandemic low in February 2020.

August total new-vehicle sales volumes were up 3.2% year over year, with one more selling day compared to August 2021. By volume, August new-vehicle sales were unchanged from July.

Consumer Confidence according to the Conference Board increased 8.3% in August when a smaller increase had been expected, but the July index was also revised slightly downward. Both underlying measures of present situation and expectations saw strong gains. The sentiment index from the University of Michigan also saw strong gains in August. The Michigan index increased 13% as gains extended from a record low in June.

August New-Vehicle Sales: The August new-vehicle seasonally adjusted annual rate (SAAR) was 13.2 million, a 1% increase from last year’s 13.1 million but down 1.1% from July’s 13.3 million. Sales volumes in August were up 3.2% year over year, with one more selling day compared to August 2021.

Combined sales into large rental, commercial, and government fleets were up almost 15% year over year in August. Sales into rental were down 18% from August 2021, while sales into commercial fleets were up 37% and sales into government fleets were up 28%. The fleet share of 12.4% held steady in August from July but was down from last August’s 12.8%.

Retail sales for August were estimated to be up 3.7%, leading to an estimated retail SAAR of 11.5 million, down from last month by 1.3%, but up 1% from last August’s 11.4 million pace.

Tight supply and minimal improvement in production have limited the potential for new vehicle sales to grow and have driven prices higher and incentives lower, which is keeping demand in check. However, since supply is not growing, there has been enough demand to absorb what has been produced and delivered. Incentive levels declined to an average of $1,117 per vehicle in August, down 2.4% from July and down 53.6% year over year.

Jobs, Jobs, Jobs: August saw 315,000 jobs created, and the prior two monthly numbers were revised for a net decline of 107,000 fewer jobs than originally estimated. The headline unemployment rate increased to 3.7% in August so is now again higher than the pre-pandemic low in February 2020. The labor force participation rate increased to 62.4% from 62.1% in July. Participation is at its highest level for the pandemic era, but is still down 1.0 percentage points from February 2020 and represents 2.6 million fewer people in the labor force compared to February 2020.

The underemployment rate, which is the broadest measure of unemployment, also increased to 7.0% from 6.7% in July. That rate is now the same as it was before the pandemic began. Monthly average hourly earnings growth slowed to 0.3%, and earnings growth year over year held steady at 5.2%. Initial jobless claims declined in August, but continuing claims rose modestly. However, all measures remain very low by historical standards, and all measures of continuing claims remain well below what they were before the pandemic.

Consumer Sentiment: Consumer Confidence according to the Conference Board increased 8.3% in August when a smaller increase had been expected, but the July index was also slightly revised down. Both underlying measures of present situation and expectations saw strong gains. Plans to purchase a vehicle in the next 6 months increased slightly but remains down year over year.

Sentiment had been negatively impacted by stock market declines and inflation, but gas prices have been declining over the last 11 weeks. The average price for unleaded was down 1.6% week over week as of Thursday to $3.81, and down 24.1% from a June peak of $5.02.

The Index of Consumer Sentiment from Morning Consult also increased 3.3% in July and 4.6% in August and is up 0.1% so far in September. The index is down 11.5% year over year and down 28.9% from February 29, 2020.

The Consumer Sentiment index from the University of Michigan also saw strong gains in August. The Michigan index increased 13% as gains extended from a record low in June.

JOIN US: The Q3 Cox Automotive Industry Insights and Forecast Call will be held on Wednesday, September 28. Jonathan Smoke and the Industry Insights team will host a conference call to review industry performance in the third quarter and what is expected for the remainder of the year. RSVP to attend.

Jonathan Smoke is chief economist at Cox Automotive.