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Monday, December 12, 2011

The Industry's Recovery: The Devil is in the Details

...I'll cheer when the glass is half full...
The media claims the auto industry as a bright spot in our recovery. If this is good news ... well, read on.
First, sales remain well below peak; we will close out the year as a whole with less than 13 million sales, against a peak SAAR [industry jargon: seasonally adjusted annual rate] of 17 million. So we're still down 24%. Nevertheless, the glass is at least half full, because that's 30% better than the sub-10 million unit level of late 2008-early 2009.
That story is grimmer when we examine the value of motor vehicle and parts shipments; they are still  down a full 33%. But again, at $30 billion shipments are still up 30% from their nadir.
Quarterly data from the FRED database of the Federal Reserve Bank of St. Louis. Click graphs to enlarge.
Well, then there's employment. That's up, by about 80,000 in retail and 90,000 in manufacturing. Given the abysmal state of our job market that's something for which we should be thankful. But again, it's from a really, really low base. Well into 2007 manufacturing employed over 1.0 million; compared to January 2007, at nadir the industry had lost 400,000 jobs. Retail saw less of a drop in percentage terms, about 15%, but compared to January 2007, in absolute terms employment at the nadir at dealerships shrank by about 246,000 and parts retailers by 58,000. If we combine the two, January 2007 employment was 2.94 million; the nadir was 2.25 million. Today (Nov 2011) we're at 2.40 million.
Generated by Smitka from BLS data. Click graphs to enlarge.
In the auto sector, retail and manufacturing, we've added 150,000 jobs. Not bad. But we were down 680,000. So at +22% we've not even regained a quarter of what we lost. It's not that things could be worse; things have been much worse.
I'll cheer when the glass is half full.
Mike Smitka
Professor of Economics, Washington and Lee University
Judge, Automotive News PACE "Supplier of the Year" competition