- Auto sales struggle with low supply, high prices.
- Housing is the bright spot of the economy.
- COVID-19 and slowing jobs recovery threatens economic growth.
Daily new COVID-19 cases stayed on an upward trend primarily due to increases in the Midwest and West. The overall economy appears to have hit a ceiling with the jobs recovering stalling and auto sales struggling. Housing remains the strongest part of the economy. The slowing jobs recovery combined with high and increasing initial jobless claims raise red flags about continued economic growth in the fourth quarter in the absence of any additional fiscal support.
Vehicle sales struggle: Retail vehicle sales lost momentum in August as low supply and high prices began to weigh more heavily on the market. September started stronger in the first half of the month, but, in this last week, much of the positive momentum seems to have been lost. Low inventories, including very limited new 2021 models, high prices in new and used, and limited incentives and discounting make it a less-than-attractive time to buy for consumers, which is atypical for this time of year.
Jobs recovery stalls: The jobs recovery appears to be stalling out again as each week brings a high and now increasing number of new job losses. Initial jobless claims were 870,000 for the week ending Sept. 18, which was an increase of 4,000 from the prior week’s 866,000. Continuing claims, which represent people who previously filed and were approved and remain on unemployment compensation, fell modestly to 12.6 million from 12.7 million. The number currently on traditional unemployment benefits represents 8.3% of February’s job total.
Consumer sentiment improves: Consumer sentiment continues to slowly improve but remains off by about 20%, which is much like the overall economy. The index of consumer sentiment from Morning Consult saw an eighth week of improvement. The daily index was up 0.2% from a week ago. It was at its highest point since March 21. The improvement trend may be challenged by a brewing storm of negativity from rising COVID-19 cases, the stalled-out jobs recovery, and a close and very partisan election.
Housing robust: The housing market continues to be the strongest part of the U.S. economy as both existing and new home sales rose again in August, and sales are at levels we haven’t seen in 14 years. Existing home sales increased again in August after strong gains in June and July. The pace of existing home sales is now up 10.5% from a year ago and at the highest level since the end of 2006, despite inventory declines.
The pace of new home sales is now 1.01 million, which is up 43.2% from a year ago and is the highest level of new home sales in 14 years. New home sales are less encumbered by inventory problems and better reflect the boost to demand caused by historically low mortgage rates. That said, new home sales can only grow as much as supply will allow, with the principal impediments to supply being labor, materials, and developed land.
Economic growth stalls: The housing performance continues to be impressive, but other data suggest that the economy has hit a ceiling on the recovery it can achieve with COVID-19 remaining an active threat.
Check back on Smoke on Cars tomorrow for a video that will include updated data.