- A mixed labor report shows cooling but likely not enough for the Fed.
- New-vehicle sales increased, mostly buoyed by fleet sales.
- Used-vehicle market lost momentum; wholesale prices rose.
The latest employment report presented another mixed view of the labor market. Job growth in March decelerated again, but the unemployment rate increased, and wage growth decelerated. Goods-related industries are shedding jobs while services add jobs. The labor market is cooling down, but likely not enough for the Fed.
Jobless claims are higher than previously reported this year. Continuing claims are now up from a year ago and compared to pre-pandemic levels. However, relative to the job base, claims remain low.
New-vehicle sales increased again in March, with the most growth in fleet but also improving momentum in retail. The average transaction price of a new vehicle fell below the average manufacturer’s suggested retail price in March for the first time in almost two years. Incentives increased again but remain relatively low.
The used retail market has been losing momentum as the new market has been gaining. That is consistent with demand softening from tax refunds being lower, retail prices increasing, and interest rates continuing to rise. Despite disappointing sales, according to the Manheim Used Vehicle Value Index, wholesale vehicle values increased 1.5% in March on a seasonally adjusted basis. Looking at price trends by week, the strongest increase happened at the start of March, and last week saw the first wholesale price decline of the year.
Mixed Labor Report Shows Cooling but Likely Not Enough for the Fed
Job growth in March decelerated again, coming in close to expectations, but the unemployment rate declined. March saw 236,000 jobs created when 230,000 had been expected. The last two monthly numbers were revised for a net decline of 17,000 fewer jobs than originally estimated. Employment sectors saw mixed trends in March. Leisure and Hospitality and Education and Health Services had the largest gains. Construction, Manufacturing, and Financial Activities saw losses. The services sector collectively added 196,000 jobs. Auto dealers shed 600 jobs in March, which left employment at dealers down 38,500 or 4.1% below the February 2020 level. Total payrolls now exceed February 2020 payrolls by 3.2 million or 2.1%.
The headline unemployment rate declined back to 3.5% from 3.6% in February. The labor force participation rate increased to 62.6% from 62.5% in February. Participation is down 0.7 percentage points from February 2020 and represents 1.9 million fewer people in the labor force compared to February 2020 despite having 3.2 million more jobs.
The underemployment rate, the broadest measure of unemployment, declined to 6.7% from 6.8% in February. Monthly average hourly earnings growth was unchanged from February at 0.3%. Earnings growth year-over-year decelerated to 4.2% from 4.6% in February.
Jobless claims are higher than a year ago. Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, are now higher than before the pandemic.
The labor market is not as strong as it was a year ago, and we are seeing more deterioration in the jobless claims data. However, jobless claims remain at historically low levels relative to the job base.
New-Vehicle Sales Increased, Mostly Buoyed by Fleet Sales
Total new light-vehicle sales were up 8.6% in March compared with a year ago with the same number of selling days. By volume, new-vehicle sales were up 19.3% from February. The March seasonally adjusted annual rate (SAAR) was 14.8 million, a 9.3% increase from last year’s 13.6 million but down 1.2% from February’s upwardly revised 15.0 million.
The strength in March was supported by strong growth of sales into fleet. Sales into rental fleets were up 46.0% year over year, sales into commercial fleets were up 6.9%, and sales into government fleets were up 39.4%. Higher inventory levels and improved fleet sales combined to lift overall industry new-vehicle sales results in March.
Including an estimate for fleet deliveries into dealer and manufacturer channels, the remaining retail sales were estimated to be up 5.6%, leading to an estimated retail SAAR of 12.9 million, which was up 1.5 million from last year’s pace, and up 0.6 million from last month’s pace. The fleet share of 17.9% was a 2.4% gain compared to last year’s share of 15.5% and was a 0.2% increase from last month’s estimated 17.7% share.
The average transaction price of a new vehicle in March fell below the average MSRP for the first time in almost two years, as the average price declined 1.1% but was up 3.8% from a year ago. The average MSRP declined 0.6% in March from February and was up 6.4% year over year. [Check back in the Newsroom tomorrow for a report from Kelley Blue Book on average transaction prices.]
The average incentive spend from manufacturers increased 2.7% to $1,516, so incentives as a percentage of average transaction price increased to 3.0%, which was the highest level since February 2022. Pricing power has declined but remains strong relative to pre-pandemic comparisons.
Used-Vehicle Market Lost Momentum; Wholesale Prices Rose
Our used retail sales estimates based on vAuto data indicate that sales increased 13% in March from February but were down 6% from a year ago. Certified pre-owned (CPO) sales increased 11% month over month and were up 1% year over year. [Check back in the Newsroom on April 12 for more details.] With higher retail used prices and interest rates and lower tax refunds, used-vehicle sales disappointed in March.
Despite disappointing sales, wholesale vehicle values according to the Manheim Used Vehicle Value Index increased 1.5% in March on a seasonally adjusted basis. The increase pushed the Index back up to 238.1, which was down 2.4% from a year ago. The unadjusted price change in March was an increase of 3.5%, leaving the unadjusted average price down 2.9% from a year ago. Looking at price trends by week, the strongest increase happened at the start of March and last week saw the first decline of the year. [Watch the replay of the Q1 Manheim Used Vehicle Value Index Call.]
Jonathan Smoke is the chief economist at Cox Automotive.