Auto Market Weekly Summary

October saw an acceleration of job gains as the labor market is improving following the peak of the Delta variant wave and the end of the pandemic unemployment assistance in September.

New-vehicle sales showed gains over September, which posted the lowest seasonal pace of sales. The used-vehicle retail market was flat and still slower than spring but is outperforming the new market.

With worsening new vehicle inventory and relatively strong retail demand, wholesale used prices increased a whopping 9.2% in October, but the seasonal adjustment contributed much of the gain as this was the first October in at least 25 years to see average wholesale prices increase.

Jobs recovery accelerated: October saw an acceleration of job gains with 531,000 jobs created when 450,000 had been expected. The prior two monthly numbers were revised up for a net increase of 235,000 more jobs than originally estimated. Job losses in government pulled down even stronger growth in private payrolls. Some sectors saw losses as job turnover may be impacting retail jobs specifically, but trade and transportation had a solid 104,000 gain in total. Leisure and hospitality had the largest gain of 164,000. Auto dealers lost 2,700 jobs, leaving employment 4.6% below the February 2020 level.

Unemployment drops: The headline unemployment rate declined to 4.6% in October from 4.8% in September. 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 was unchanged from September, so the likely true headline unemployment rate in October was indeed lower. The labor force participation rate was unchanged at 61.6%.

The underemployment rate, which is the broadest measure of unemployment, declined to 8.3%, which was the lowest rate yet for the pandemic, but it is 1.3 percentage points higher than it was in October 2019. The percentage of the unemployed Americans reporting being on temporary layoff, as opposed to permanent, declined to 14.2% in October from 14.6% in September. That number is only 0.3 percentage points higher than it was in October 2019.

Average hourly earnings increased 0.4% in October following a stronger 0.6% increase in September. Average hourly earnings were up 4.9% from a year ago from 4.6% in September.

As of October 23, 2.11 million on remain on traditional unemployment benefits, which are limited to at most six months of coverage. That number is the lowest for the pandemic and is now only 390,000 higher than the level of coverage prior to the pandemic. About 11.3 million were on some form of benefits including pandemic unemployment assistance as of September 4, which was when that assistance ended, removing support from 8.5 million people. Now the broadest measure of continuing benefits has fallen to 2.67 million, which was a new low for the pandemic and only 570,000 higher than the 2.10 million level prior to the pandemic.

Initial claims declined last week to 269,000, which was a new low for the pandemic. Weekly claims were declining toward the 212,000 average per week in 2020 in the weeks before the pandemic began.

Vehicle sales better than September: Total new-vehicle sales in October were down 23% from a year ago with one less selling day compared to last year. The October SAAR was 13.0 million, which was up from the 12.2-million pace in September but down 21% from last year’s 16.4 million and 22% lower than October 2019’s 16.7 million rate.

Combined sales into large rental, commercial, and government buyers were down 24% from the year-ago October. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were down 21% from a year ago, leading to an estimated retail SAAR of 11.5 million, which was down from 14.1 million in October 2020 and down from 13.5 million in October 2019.

Average incentives fell to $2,003, which was a 20-year low while the average transaction price reached a record $46,036.

Used sales drop: We initially estimated that total used-vehicle sales were down 10% from a year ago in October. Compared to 2019, total used-vehicle sales were down 11%. The October used SAAR was 35.9 million, which was down from 39.9 million last year and unchanged from September. The October used retail SAAR estimate was 19.6 million, down 7% from 21.1 million last year and unchanged from September. Certified pre-owned (CPO) sales declined 7% in October compared with a year ago and were down 5% from September. CPO sales are up 9% year-to-date against last year.

Wholesale index soars: The Manheim Used Vehicle Value Index increased 9.2% in October from September, leaving the index up 38.1% year-over-year and at a new record. Some of the monthly increase is a result of the seasonal adjustment, as October typically sees above-average vehicle depreciation and therefore used price declines. This October was the first October in the history of the Manheim Index data, which dates to 1997, to see a non-seasonally adjusted price increase in October. The non-adjusted price increase in October was 5.4%. The non-adjusted price was up 39.4% from a year ago.

An Auto Market Report video will be published in Smoke on Cars on Tuesday, November 9.