Connect with us

Uncategorized

As the Clock Winds Down on a Year Steered by Tight Inventory and Rising Loan Rates, Cox Automotive Offers 10 Predictions for 2023

As the Clock Winds Down on a Year Steered by Tight Inventory and Rising Loan Rates, Cox Automotive Offers 10 Predictions for 2023
PR Newswire
ATLANTA, Dec. 19, 2022

ATLANTA, Dec. 19, 2022 /PRNewswire/ — With the start of the New Year just weeks aw…

Published

on

As the Clock Winds Down on a Year Steered by Tight Inventory and Rising Loan Rates, Cox Automotive Offers 10 Predictions for 2023

PR Newswire

ATLANTA, Dec. 19, 2022 /PRNewswire/ -- With the start of the New Year just weeks away, the Cox Automotive Industry Insights team offers its expectations for the U.S. automotive market in 2023. By nearly all measures, 2022 was a difficult year for both the industry and the consumer, marked by historically low new-vehicle inventories, high prices, and stubborn inflation chipping away at monthly budgets. A relatively strong jobs market was a tailwind, but all the while, a hawkish Federal Reserve pushed rates higher, essentially riding the brakes as the auto industry struggled to gain momentum.

With the New Year just weeks away, Cox Automotive offers its expectations for the U.S. automotive market in 2023.

"This past year was challenging not only to forecast but for the industry to manage," said Cox Automotive Chief Economist Jonathan Smoke. "As we look forward into 2023, we see one set of challenges being replaced by another. We expect the year ahead to be one of transition, as both the consumer and the industry move past the remnants of a global pandemic and set a new course for mid-decade growth."

Guided by recent research, intelligence capabilities powered by DRiVEQ, the largest breadth of first-party data in the automotive ecosystem, and an unmatched team of analysts and experts, Cox Automotive posits 10 trends that will shape the auto business in 2023.

#1: A Slow-Growing Economy Will Place Pressure on the Automotive Market.

While the risk of recession in 2023 remains, Cox Automotive expects the economy to see at least slowing or very weak growth as the Federal Reserve tightens monetary conditions and consumers continue to wrestle with high interest rates. A job-wrecking recession is a worst-case scenario for the auto industry, but hope for an economic soft landing remains. Either way, a sputtering economy will hold back the auto market in the year ahead.

#2 New-Vehicle Inventory Levels Will Continue to Increase.

New-vehicle production challenges are beginning to ebb, and inventory levels are measurably improving. While lingering supply chain and labor challenges will remain, and capacity will not return completely to pre-pandemic levels in the foreseeable future, stronger production levels and softer demand will lead to higher days' supply and, ultimately, more vehicle options for shoppers in 2023.

#3: Total Retail Vehicle Sales Will Fall in 2023, as New-Vehicle Sales Grow, Used Sales Decline.

With new-vehicle inventory levels improving as demand slows, Cox Automotive forecasts 3% year-over-year new-vehicle sales growth in 2023, with the market hitting 14.1 million units. Increasing fleet sales will help the absolute number. A lack of nearly new supply, declining affordability, and a shrinking pool of buyers will challenge the used-vehicle market. Overall retail sales will decline in 2023, adding competitive pressures to the market, especially in used.  

#4: Sales of Electric Vehicles in the U.S. Will Surpass 1 Million Units for the First Time.  

The battery-electric vehicle market continues to outpace the overall market in sales, and a new milestone is on the horizon: 1 million EVs sold in the U.S. in 2023. With expanded product availability coming and a fresh round of government-backed incentives to motivate buyers, the Cox Automotive team is forecasting continued good news in the electrified vehicle market.  

#5: Used-Vehicle Values Will See Above-Normal Depreciation for a Second-Straight Year. 

What the market gives, the market takes: After historic value increases in 2020 and 2021, followed by above-average depreciation for most of 2022, used-vehicle values are likely to see another year of above-normal depreciation, especially in the first half of 2023. Price trends should normalize in the second half of the year as constrained wholesale supply supports used values and used retail prices fall into a normal relationship with new prices. 

#6: Vehicle Affordability Will Be the Greatest Challenge Facing Vehicle Buyers. 

Elevated retail prices and high auto loan interest rates combined to produce record monthly payments in 2022, levels that increasingly pushed lower income and lower credit quality consumers out of the market. More of the same is expected in 2023, as the automakers increasingly cater to the new-vehicle market with more expensive products for higher-income consumers, leaving less-affluent and subprime buyers struggling to find affordable vehicle payments that satisfy monthly budgets.

#7: All-Cash Deals Will Increase to Levels Not Seen in Decades.    

With auto loan interest rates hitting 20-year highs, the rise in all-cash deals will continue. More wealthy consumers will buy with cash rather than finance in 2023, placing downward pressure on dealership F&I profits. This change will be felt more acutely in the new-vehicle market and will likely have lingering impacts on industry profit pools and future buying behaviors. 

#8: Dealership Service Operations Volume and Revenue Climb.

As affordability issues lead more owners to maintain current vehicles, 2023 should see continued strong dynamics in the service lanes, with or without a recession. Fixed operations saw strong revenue growth in 2022 as pricing power and strong demand led to large increases in average ticket size despite total service volumes not yet recovering to 2019 levels. With retail sales expected to be flat or down, fixed operations as a profit center will be more important than ever in 2023.

#9: Half of Vehicle Buyers Will Engage With Digital Retailing Tools.

The shift to eCommerce was accelerated by the pandemic and shows no sign of fading. In the year ahead, Cox Automotive forecasts that half of all vehicle buyers will engage with at least one digital tool during the purchase process. Importantly, fully digital vehicle purchases will continue to be only a small percentage of the business, as most buyers will pursue an omnichannel vehicle buying experience.

#10: Federal Incentives Will Encourage More Fleet Buyers to Consider Electrified Solutions. 

A key element of the Inflation Reduction Act of 2022 was the reshaping of EV tax credits in the U.S. Within the new laws are incentives designed to entice fleet operators to consider electrified vehicles in the coming year. Fleets have historically shown slow adoption of EVs, but recent research indicates 66% of fleet buyers are considering EVs, up from 43% in 2021. New incentives and investments in charging infrastructure will likely amplify the trend.

About Cox Automotive

Cox Automotive Inc. makes buying, selling, owning, and using vehicles easier for everyone. The global company's more than 27,000 team members and family of brands, including Autotrader®, Dealer.com®, Dealertrack®, Kelley Blue Book®, Manheim®, NextGear Capital®, VinSolutions®, vAuto® and Xtime®, are passionate about helping millions of car shoppers, 40,000 auto dealer clients across five continents and many others throughout the automotive industry thrive for generations to come. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately-owned, Atlanta-based company with annual revenues of nearly $20 billion. www.coxautoinc.com

View original content to download multimedia:https://www.prnewswire.com/news-releases/as-the-clock-winds-down-on-a-year-steered-by-tight-inventory-and-rising-loan-rates-cox-automotive-offers-10-predictions-for-2023-301706369.html

SOURCE Cox Automotive

Read More

Continue Reading

Uncategorized

February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

Published

on

By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

Read More

Continue Reading

Uncategorized

Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

Published

on

Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

Read More

Continue Reading

Uncategorized

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

Published

on

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

Read More

Continue Reading

Trending