Auto Market Weekly Summary

Job creation numbers for September were disappointing, though new jobless claims fell as did the unemployment rate – to a pandemic low – while wages grew.

New-vehicle sales nosedived on low inventories, delivering the lowest seasonally adjusted annual rate (SAAR) in 16 months. The retail used vehicle market also cooled but still outperformed the new-vehicle market.

Consumer sentiment has faded further so far in October.

Jobs picture mixed: September saw a disappointing 194,000 jobs created when 500,000 had been expected, but the prior two monthly numbers were revised up for a net increase of 169,000 more jobs than originally estimated. Job losses in government and education contributed to the miss. Most other sectors saw gains, with trade and transportation, leisure and hospitality leading the way, which is what we would expect from improving activity following declines in COVID-19 cases. Auto dealers saw only 400 new jobs created, which left dealership employment 4.5% below the February 2020 level.

Unemployment rate drops: The headline unemployment rate declined to 4.8% in September from 5.2% in August. However, the Bureau of Labor Statistics reported that the rate could have been 0.1 points higher if not for misclassification due to confusion about people considered as employed but away from work. This error rate declined from 0.3 points in August, so the likely true headline unemployment rate in September was indeed lower.

The labor force participation rate ticked lower to 61.6% from 61.7% in August. The underemployment rate, which is the broadest measure of unemployment, declined to 8.5%, which was the lowest rate yet for the pandemic. Still, it is 1.6 percentage points higher than it was in September 2019.

The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, declined to 14.6% in September from 14.9% in August. That number is 11 percentage points higher than it was in September 2019.

Average hourly earnings increased 0.6% in September following the same increase in August. Average hourly earnings were up 4.6% from a year ago from 4.3% in August

Jobless claims decline: The latest traditional continuing claims data from the week ending September 29 declined by 97,000 to 2.71 million. Continuing claims averaged 1.73 million in the weeks leading up to the pandemic in 2020. The broadest measure of continuing claims, which includes pandemic assistance, declined by 855,000 to 4.2 million in the latest data. Pandemic assistance covered 8.5 million Americans when it ended in early September. As a result, the broadest measure of continuing claims is down 7.8 million over the last four weeks. Initial claims for the week ending October 2 declined by 38,000 to 326,000 claims. Initial claims averaged 212,000 prior to the pandemic.

New-vehicle sales plummet: Total new-vehicle sales in September were down 25% from a year ago with the same number of selling days compared to last year. The September SAAR was 12.2 million, which was the lowest sales pace in 16 months and down 25% from last year’s 16.3 million and 29% lower than September 2019’s 17.2 million rate.

Combined sales into large rental and commercial fleets and government buyers were down 21% year over year in September. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were down 23% from a year ago, leading to an estimated retail SAAR of 10.7 million, which was down from 14.0 million in September 2020 and down from 13.8 million in September 2019.

Average new-vehicle prices hit a new record of $45,031 in September. Incentives fell to a per-vehicle average of $2,356, which was a 20-year low.

Used-vehicle sales fall: We initially estimate that total used-vehicle sales were down 13% in September from a year ago. Compared to 2019, total used vehicle sales were down 11%. The September used SAAR was 36.0 million, which was down from 40.9 million last year and down from 36.5 million in August.

The September used retail SAAR estimate was 19.5 million, down 10% from 21.7 million last year and unchanged from August. The September 2019 retail SAAR was 21.1 million, so the used retail market has cooled down compared to the spring but is outperforming the new market.

Certified pre-owned (CPO) sales increased 1% in September from a year ago and were up 2% from August. CPO sales are up 11% year-to-date compared to last year. More details will be published in a Data Point later today.

Wholesale prices rise: The Manheim Used Vehicle Value Index (MUVVI) increased 5.3% in September from August, leaving the index up 27.1% year-over-year and at a new record. On a month-over-month basis, every segment saw gains. Listen to a replay of the Q3 MUVVI call held on October 7.

Consumer sentiment falls further: Consumer sentiment based on the daily index from Morning Consult has eroded further so far in October. The index declined 5.5% in July, 3.1% in August, 0.8% in September, and is down another 0.5% so far in October. That left sentiment down 20.6% from February 29, 2020.

An Auto Market Report video will be published in Smoke on Cars on Tuesday, October 12.