One closely followed measure of consumer spending is motor vehicle sales (where “motor vehicle” means cars and light trucks), and as you’ve likely seen in the news [1], motor vehicle sales have taken off in the first three months of 2012. This is good news for manufacturing, especially for the rebounding US auto industry (and hence for American jobs). In fact, since mid-2009, sales have been trending up, and for the first quarter of 2012 they averaged 14.5 million (at an annual rate), the highest level of sales since the first quarter of 2008.
Why are motor vehicle sales increasing so much? Contributing factors include the improving labor market, increases in income, pent-up demand (the average age of vehicles on the road is at an all time high), historically low interest rates, and perhaps the mild weather this winter.
While both car and light truck sales have risen in the first quarter, car sales grew faster. In fact, sales of new cars made up 53 percent of all motor vehicle sales in the first quarter, the highest share since the third quarter of 2009. Higher gas prices have played a role here, as rising gasoline prices tend to shift sales toward more energy-efficient autos and away from light trucks.
Hopefully the strength in the motor vehicle sector will translate into higher employment numbers in the eagerly awaited Bureau of Labor Statistics’ (BLS’) Friday report on the employment situation in March.
In addition to strong motor vehicle sales, a variety of other indicators have been suggesting continued strength on the job front. For example, this past Monday the Institute for Supply Management (ISM) reported on March 2012 manufacturing [2], showing increased growth from February to March. Additionally and importantly, the employment component of the ISM increased 2.9 percentage points in March (for the nonmanufacturing ISM which came out today, the employment index went up 1.0 percent). New unemployment insurance claims have trended down and several surveys of business hiring plans have show recent improvement. Finally, today ADP released their report on March employment [3] indicating 23,000 new jobs in the manufacturing sector and an overall gain of 209,000 on the private payrolls (and the February estimate was revised upwards by 16,000).
However, we’ll have to wait until Friday to see the March employment report.
~Mark Doms, Chief Economist, U.S. Department of Commerce
April 4, 2012
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