Lenders are keeping a sharp eye on the unemployment rate as a predictor of vehicle sales.
For 2006 and 2007, the unemployment rate tracked at a relatively steady 4.6%. Monthly vehicle sales, meanwhile, zigzagged, but largely stayed in the one-million to 1.5-million range. Since the beginning of 2008, though, the two indicators’ tracks have diverged.
This graph plots vehicle sales against the unemployment rate:
Excluding a few hiccups, vehicle sales have effectively plummeted while unemployment has spiked. At the pace that unemployment has been rising, monthly vehicle sales could drop to 430,000 units by 2010. Last month, 688,909 light-duty vehicles were sold in the U.S.
The percentage of people out of work is expected to continue on its current trajectory. The White House predicts an unemployment rate of 8.1% by yearend, and some analysts have forecast a 9% unemployment rate in 2010.
I don’t think vehicle sales will plunge below 450,000 units. In fact, I think they’ll start to creep back up to the 800,000-unit mark by midyear. That would probably put us on track for the two lines to intersect again in about 2012.
