- The labor market remains robust. Job and wage growth accelerate.
- New-vehicle sales for April were surprisingly strong; the average price was flat.
- Used-vehicle sales lost momentum in April.
The latest employment report represented strong and improving labor market conditions, which was unexpected. Job growth in April accelerated, the unemployment rate declined, and wage growth accelerated. All major industry sectors added jobs in April, but services represented most of the gains.
The labor market remains strong despite the Fed tightening monetary conditions and credit access tightening from bank failures. Last Friday’s report will not be taken well by the Fed, having just raised rates and indicating openness to pausing. We will have another job report and two inflation reports before the Fed’s next rate decision on June 14.
Initial jobless claims are increasing, are higher year over year, and are higher than before the pandemic began. Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, have declined over the last month and are back to a level below before the pandemic. The labor market is not as strong as a year ago, but the metrics are varied and do not indicate major deterioration or signs of significant stress emerging.
New-vehicle sales saw continued improving momentum in April, but sales into fleet and increasing incentives are contributing to the 9% year-over-year gains.
The used retail market has lost momentum as the new market has gained. As the retail market has slowed, wholesale vehicle value trends have also turned, according to the Manheim Used Vehicle Value Index. The index declined 3% in April on a seasonally adjusted basis.
The Labor Market is Robust; Lowest Unemployment Since 1969
Job growth in April accelerated when further deceleration was expected, and the unemployment rate declined. April saw 253,000 jobs created when 185,000 had been expected. The prior two monthly numbers were revised down for a net decline of 149,000 fewer jobs than originally estimated. As a result, April broke a two-month job growth deceleration trend.
All major employment sectors saw job gains in April. Education and Health Services had the largest increase. Information had the smallest improvement. The services sector collectively added 197,000 jobs. Auto dealers added 200 jobs in April, which left employment at dealers down 60,900 or 4.6% below the February 2020 level. Total payrolls now exceed February 2020 payrolls by 3.3 million or 2.2%.
The headline unemployment rate declined back to 3.4%, the same as in January and otherwise the lowest rate since May 1969.
The labor force participation rate was steady at 62.6%. 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 adding 3.3 million more jobs.
The underemployment rate, the broadest measure of unemployment, declined to 6.6% from 6.7% in March. Monthly average hourly earnings growth accelerated to 0.5% from March’s 0.3%. Earnings growth year over year accelerated to 4.4% from an upwardly revised 4.3% in March.
Initial jobless claims are higher than a year ago and higher than before the pandemic began. Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, have declined over the last month and are back to a level below before the pandemic.
The labor market is not as strong as it was a year ago, but the metrics are varied and do not indicate major deterioration or signs of significant stress emerging. Moreover, jobless claims remain at historically low levels relative to the job base.
New-Vehicle Sales for April Came in Surprisingly Strong
Total new light-vehicle sales were up 9.0% in April from a year ago, with one less selling day. By volume, new-vehicle sales were down 1.5% from March. The April SAAR was 15.9 million, which was up 11.4% increase from last year’s 14.3 million and up 7.2% from March’s 14.8 million.
The strength in April was again supported by strong sales growth into fleet. Combined sales into large rental, commercial, and government fleets were up 39% from a year ago. Sales into large rental fleets were up 64% year over year, while sales into commercial fleets were up 13%, and sales into government fleets were up 54%.
Including an estimate for fleet deliveries into dealer and manufacturer channels, the remaining retail sales were estimated to be up 6.1%, leading to an estimated retail sale space, or seasonally adjusted annual rate (SAAR), of 13.4 million, up 1.3 million from last year’s pace and up 0.5 million from last month’s pace. The fleet share of 17.5% was a 2.2% gain compared to last year’s share of 15.3% but was a 0.4% decline from last month’s estimated 17.9% share.
New-Vehicle Average Price Flat
According to Kelley Blue Book, the average transaction price (ATP) of a new vehicle in April was flat, with April at $48,275. The average price fell further below the average manufacturer’s suggested retail price (MSRP). The average price was up 3.7% from a year ago, while the average MSRP increased 0.2% in April from March and was up 5.9% year over year. Manufacturers’ incentive spend jumped 11% to an average of $1,714 per vehicle. Incentives as a percentage of average transaction price increased to 3.6%, the highest level since January 2022. [The full Kelley Blue Book ATP report will be published on Tuesday. May 9.]
Pricing power has declined but remains strong relative to pre-pandemic comparisons.
Used-Vehicle Sales Lose Momentum
Our used retail sales estimates based on vAuto data indicate that sales declined 8% in April from March and were down 8% from a year ago. Certified pre-owned (CPO) sales fell 6% from March and were down 4% year over year.
As the retail market has slowed, wholesale vehicle value trends have also turned, according to the Manheim Used Vehicle Value Index. The index declined 3% in April on a seasonally adjusted basis. The decline pushed the Index back down to 230.8, down 4.4% from a year ago. The unadjusted price change in April was up 0.1%, leaving the unadjusted average price down 5.6% year over year. Looking at price trends by week, price declines accelerated as the month progressed.
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.