In December, truck sales tanked while car sales and private jobs (per ADP) increased
– by New Deal democrat
I will write about the biggest economic release of the day, the ISM services report for December, later. In the meantime, here are two other important data releases for December, one from a private source (ADP), and the other from the BEA’s GDP updates.
As an initial matter, I don’t think we can be confident of the month to month accuracy of the official jobs report for several more months – and that is not counting any further disruption from another possible government shutdown in February.
To cut to the chase, ADP reported a 41,000 gain in private jobs in December. As shown in the graph linked to below, according to this series since July only 27,000 jobs have been added to the economy in total, or an average of 5,400 each month(!):
Total Nonfarm Private Payroll Employment, FRED, St. Louis Fed
While this is not recessionary, it is about as close as you could come to the precipice. We’ll see what the official report says on Friday.
An important if underutilized short leading indicators for recessions is vehicle sales. After houses, these are the biggest durable purchases made by the vast majority of consumers. As I have noted in the past, typically truck sales decline first (and rebound second), followed by car and pickup truck sales (which rebound first). Additionally, truck sales are much less noisy and so, after housing, give the first clear warning that a recession is likely ahead.
And December truck sales, which declined another -9% from November to .311 million annualized units, and are down -43.6% from their post pandemic peak, are clearly recessionary (note: since FRED for some reason implements a one month delay in updating its graphs, I have subtracted the December values for car and truck sales so that that level shows at the 0 line. Additionally, I have multiplied the truck sales number by 10 for scale):
Light Weight Vehicle Sales Autos and Trucks, FRED
In fact, there has never been a case where such a decline has not been shortly followed by a recession, if the economy was not already in one.
Car and light truck sales, by contrast, increased 0.4 million in December to 16.0 million annualized units. This is down -11.6% from their post pandemic peak in 2021, and -10.6% down from their secondary peak last March when there was a rush to buy before tariffs kicked in.
Further, while the 3 month average trajectory since March has been declining, at their current levels car and light truck sales are at higher levels than at any time from 2022 through late 2024. So while truck sales are very recessionary, car sales are not recessionary at all.
I’ll try to draw some broader implications for the economy once we have the ISM services report in hand as well.
“Auto and truck purchases give conflicting signals on expansion vs. recession,” Angry Bear by New Deal democrat
Trump implemented a 25% tariff on heavy and medium-sized trucks on Nov. 1, and about half of all such trucks sold in the U.S. are imports, so this could just be a tariff effect rather than an underlying economic effect. Trump imposing new 25% large truck tariff starting Nov. 1
John:
That is coming out of Mexico, yes? I think it may be such. Is this just assembly?
Bill
Oh, good point. “Under the United States-Mexico-Canada Agreement (USMCA), medium- and heavy-duty trucks can move tariff-free if at least 64% of their value originates in North America through components, raw materials, or assembly labor.” (Trump announces 25% tariff on all imported medium- and heavy-duty trucks)
However, the Trump administration intends to tariff the non-U.S. content of even those trucks: Most heavy trucks exempt from new 25% truck tariff, ‘non-U.S. content’ will be taxed.
For more details, “For heavy-duty trucks that qualify for United States-Mexico-Canada Agreement treatment, importers can apply for the 25% tariff to be charged only on non-U.S. content. The Commerce Department will determine which importers are eligible. The order also tasks the agency with establishing a similar process for medium-duty truck imports. In the meantime, USMCA-compliant medium-duty trucks will not be charged the new tariff. ” from https://www.supplychaindive.com/news/trump-truck-bus-tariffs-nov-1/803171/ , so it looks like the full 25% may have gone into effect for at least heavy trucks, even those covered by the USMCA.
So my magic 8 ball of a brain is back to “reply hazy, ask again later.”
John:
Allow me to add another factor. It is possible for something to go back and forth across the Mexican border. A part can be assembled in the US and then go to Mexico to be added to an assembly . . . wire harness comes to mind. or assemblies made in the US and then attached to another assembly in Mexico which may also include parts from Europe or China or Philippines which will be attached.
It is not as simple as Herr Trump thinks.
Worked automotive for a number of years besides other industries. My experience is most supply chain and manufacturing. However, you raise some good discussion points.
Some people buy trucks for their usage capabilities but far more were buying them as fashion items. If trucks are going out of fashion then that is a good thing as it has no negative effect on their functionality (and probably a positive effect in the long run). My next truck will be an SUV because I am too old for trailers over one ton and my wife has trouble stepping up high into my truck cab. The redneck Bubba toy/status symbol aspect will be more difficult to erode, but higher prices will cut out a lot of teens and that is where it begins with boys and their toys.
@RC,
Like so much of American culture, the popularity of SUVs and pick-up trucks is mostly a testament to marketing. The only need they fill is egotistical. I’ve never seen the attraction of owning a truck or SUV. My goals are cheap reliable ground transportation and staying out of the car as much as possible. YMMV.
I had a colleague who insisted he had to own an urban assault vehicle because he needed a way to carry his skis. LOL!