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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Job growth improved. The unemployment rate fell.
  2. The Federal Reserve’s efforts make a soft landing likely.
  3. New-vehicle sales rose in November. Used sales declined.

Job growth in November improved modestly, about as expected. Labor force participation grew, and the unemployment rate declined while wage inflation was stable at the lowest level since June 2021.

The Fed’s efforts to slow the economy and a “soft landing” still looks likely.

The new vehicle sales SAAR declined in November as sales into fleets declined, and incentives and discounting grew. Used sales also deteriorated, which is typical for this time of year. Used vehicle prices fell again in November.

Job Growth Improved, While Unemployment Rate Declined

Job growth in November improved modestly, about as expected. November saw 199,000 jobs created when 185,000 had been expected.

September’s job numbers were revised down for a net decline of 35,000 fewer jobs than originally estimated. The three-month moving average of new jobs, a reliable indicator of momentum, is now 204,000, which is back close to the pace in June and July.

The Fed’s efforts to slow the economy, specifically the strong labor market, have borne fruit as job creation is much lower than a year ago, but a “soft landing” still looks likely.

The private sector created 159,000 jobs in November. Manufacturing saw 23,000 new jobs, boosted by the conclusion of the UAW strikes. Services produced 121,000 new jobs, but the month had losses in trade, transportation and utilities, and professional services.

Education and health care had the largest gain in the private sector, with 99,000 jobs created, an increase from 83,000 in October. Auto dealers added 2,100 jobs, which left employment at dealers down 37,600 or 2.9% below the February 2020 level. Total payrolls now exceed February 2020 payrolls by 4.7 million or 3.1%.

The headline unemployment rate declined to 3.7% from 3.9% in October. Growth jobs drove the lower rate as the labor force participation rate increased slightly to 62.8% from 62.7% in October, the highest level since February 2020. Participation is down 0.5 percentage points from then and represents 1.3 million fewer people in the labor force compared to then despite adding 4.7 million jobs.

The underemployment rate, the broadest measure of unemployment, declined to 7.0% from 7.2% in October, so it is back to where it was in September and February 2020. Monthly average hourly earnings growth increased to 0.4% from 0.2% in October. Earnings growth year over year was steady at 4.0%, the lowest wage inflation level since June 2021.

November New-Vehicle Sales Rose From a Year Ago

Total new-light-vehicle sales were up 7.3% in November from a year ago, with the same number of selling days as November 2022. By volume, new-vehicle sales were up 1.9% from October to November. The November SAAR was 15.3 million, a 7.4% increase from last year’s 14.3 million but down 0.7% from October’s 15.3. Declining fleet sales led to the weakest SAAR since July.

Combined sales into large rental, commercial and government fleets were down 9% from a year ago. Sales into large rental fleets were up 1% from a year ago, while sales into commercial fleets were down 22%, and sales into government fleets were up 8%. Including an estimate for fleet deliveries into dealer and manufacturer channels, the remaining retail sales were estimated to be up 10.2%, leading to an estimated retail SAAR of 13.0 million, which was up 1.1 million from last year’s pace but down 0.4 million from last month’s 13.4-million pace. The fleet market share of 14.7% was a 2.2% share decline compared to last year’s share of 16.9%.

The average transaction price of a new vehicle in November increased 0.6% from October at an initial estimate of $48,247. Still, the average price lost ground on the average manufacturer’s suggested retail price (MSRP), declining to 98.4%, the lowest level since April 2021. The average price was down 1.5% from a year ago, while the average MSRP increased 0.9% in November from October and was up 0.8% from a year ago.

The average incentive spend from manufacturers increased 9.7% to $2,529, up 133% year over year. Incentives as a percentage of average transaction price increased to 5.2%, the highest level since August 2021.

Retail Used-Vehicle Sales Estimated to Drop in November

Our used retail sales estimates, based on vAuto data, indicate that sales volumes were down 7% in November compared to October, with volumes down 2% year-over-year. Certified pre-owned (CPO) sales also had a weaker month, down 1% In November from October but were up 4% from a year ago.

According to the Manheim Used Vehicle Value Index, wholesale vehicle values declined 2.1% in November, following a 2.3% decline in October on a seasonally adjusted basis. The Index dropped to 205.0, down 5.8% from a year ago. The unadjusted price change in November was a larger decline of 2.9%, leaving the unadjusted average price down 7.5% from a year ago.

Jonathan Smoke
Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.

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