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Smoke on Cars

Auto Market Weekly Summary: January 9


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Article Highlights

  1. Job growth slowed, and jobless claims rose but remain historically low
  2. 2022 new-vehicle sales of 13.7 million were the lowest since 2011.
  3. New-vehicle prices climb, but rising supply is diminishing pricing power.

Job growth in December slowed, the unemployment rate fell, and wage growth decelerated. Continuing jobless claims increased from historical lows, but there is little evidence of major deterioration in the jobless claims data. Moreover, relative to the job base, jobless claims remain at historically low levels.

The seasonally adjusted annual rate (SAAR) of sales for light new vehicles declined in December to 13.3 million. New-vehicle transaction prices increased, according to Kelley Blue Book. The manufacturer’s suggested retail prices (MSRPs) increased faster than prices paid, but the average price paid remained higher than the average MSRP. Incentives are starting to grow again as supply is building quickly.

Job Growth Slowed, Jobless Claims Rose

Job growth in December slowed, the unemployment rate fell, and wage growth decelerated. December saw 223,000 jobs created when 200,000 had been expected. The prior two monthly numbers were revised for a net decline of 28,000 fewer jobs than originally.

Most of the December gains were in the service sector with Leisure and Hospitality and Education and Health Services delivering 145,000 jobs collectively. Professional and Business Services lost jobs, with most of the losses coming from Administrative and Support Services. Auto dealers had no change in jobs in December, so employment at dealers remained down 70,000, or 5.3%, below the pre-pandemic February 2020 level. Total payrolls now exceed February 2020 payrolls by 1.239 million.

Jobless Rate Dipped

The headline unemployment rate declined to 3.5% from a downwardly revised 3.6% in November. The labor force participation rate increased to 62.3% from 62.1% in November. Participation still is down 1.0 percentage points from February 2020 and represents 2.6 million fewer people in the labor force compared to February 2020. The underemployment rate, which is the broadest measure of unemployment, declined to 6.5% from 6.7% in November and is at a new 53-year low.

Monthly average hourly earnings growth decelerated to 0.3% from a downwardly revised 0.4% in November. Earnings growth year over year decelerated to 4.6% from a downwardly revised 4.8% in November.

Continuing jobless claims increased over the course of December but ended the month only modestly higher and was potentially impacted by lower claims during the holidays. Seasonally adjusted initial claims fell over the course of the month and ended December at the lowest level since September.

While large layoffs in the tech sector have been widely reported in the media, there is little evidence of major deterioration in the jobless claims data. Moreover, relative to the job base, jobless claims remain at historically low levels.

New-Vehicle Sales Pace Dropped in 2022

December’s total new-light-vehicle sales were up 4.9% year-over-year with the same number of selling days as December 2021. By volume, December new-vehicle sales were up 12.2% from November, but December usually sees growth closer to 20% as was the case in 2021.

This December’s sales pace, or SAAR, was 13.3 million, which was a 4.7% increase from the 12.7 million in 2021 but down 6.3% from November’s upwardly revised 14.2 million.

With the initial December sales volumes, total light vehicle sales were 13.7 million in 2022, which was the lowest year since 2011.

Fleet Sales Increased in December

Combined sales into large rental, commercial, and government fleets were up 47% in December compared with a year ago. Sales into large rental fleets were up 100% from the previous year, while sales into commercial fleets were up 29% and sales into government fleets were up 13%.

Including an estimate for fleet deliveries into dealer and manufacturer channels, the remaining retail sales were estimated to be up 1.1%, leading to an estimated retail SAAR of 12.0 million, down 0.5 million from last month’s pace, or down 4.7%, but up 0.8 million from last year, or 7.2%. The fleet share of 14.2% was down 1.5% from November and was up 3.3% from the previous year.

New-Vehicle Supply Continues Growing

New-vehicle supply has been growing more rapidly than sales over the last several months. Available supply was just shy of 1.8 million units, which is nearly 700,000 units higher than the same time a year ago, or up 66%. Days’ supply was up to 56 days, which is also up 66% year-to-year.

Vehicle Transaction Prices Soar, according the Kelley Blue Book

The average transaction price of a new vehicle in December was at a record high of $49,507, an increase 1.9% from November and up 4.9% from the year earlier. The average price paid, according to Kelley Blue Book estimates, has now been above the average MSRP for more than a year now. [A full report on average transaction prices will be published in the Newsroom on Wednesday, Jan. 11.)

The gap between the price paid and MSRP is closing, as the average MSRP increased 2.2% in December from November and was up 6.4% year-to-year. The average price relative to the average invoice price declined to 12.5%, which was the lowest since August 2021.

The average amount spent by automakers on incentives jumped 23.9% to $1,319 per vehicle in December. Incentives as a percentage of average transaction price increased to 2.7%, which was the highest level since April. The 2.1% recorded in September and October was the historic low.

Pricing power is declining as the new vehicle supply grows.

Join us for the 2023 Cox Automotive Industry Insights and Forecast Call hosted by Chief Economist Jonathan Smoke and the Industry Insights team on Thursday, January 12, at 11 a.m. EST. During this 90-minute session, you will hear how the auto industry performed in 2022 and how the Cox Automotive team sees the industry progressing in the new year.

Register to Attend.

Jonathan Smoke is the chief economist at Cox Automotive.

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