December 3, 2010
Mixed Messages on the Economy?
The Wall Street Journal, among many sources, today reports that the U.S. economy added fewer new jobs than was expected and saw an increase in the unemployment rate from 9.6% in October to 9.8% in November. (FYI, the November 2009 jobless rate was 10%.)
The Detroit News, among many sources, yesterday reported that November automobile sales were up 17% this year over November sales a year ago. In that article, a GM economist states that improved sales seemed to be linked to improving employment numbers. The article explains:
Sales should continue climbing, riding on improved consumer confidence and long-awaited signs that jobs are being created in meaningful numbers.
"It's all about employment," said Yingzi "Sue" Su, senior economist for General Motors Co. "It's only recently that the logjam seems to be broken," which should spur spending.
Does this mean sales are likely to drop in December because of the bad employment numbers? Perhaps, but maybe it isn't all about employment; just mostly. Auto sales might be a better indicator (generally, as opposed to month to month) of where the economy is headed than one month's employment numbers. For most people, cars are relatively long term commitments often coming with a monthly loan payment of three to five years (or more). Notwithstanding some questions about the practices of some auto lenders, this means that (most) purchasers expect to be able to make such a payment over that time frame and (most) lenders expect that, too.
If auto sales, and the rest of the economy, are based primarily on employment numbers, then it's likely that December will be a less successful month than the automakers were hoping. For now, though, it appears that the auto companies are feeling better about the economy this year than they did last year: Auto incentives are down 9.4% as compared to a year ago. Then again, maybe all that will change with today's employment information.