NADA Chief Economist Says Higher Wages Would Help Auto Sales

SAN FRANCISCO – Auto sales are growing along with the U.S. economy, but wages need to go up for the car market to stay strong long-term.  

So says Steve Szakaly, chief economist of the National Automobile Dealers Assn. during an outlook presentation at the trade group’s annual convention here.

“Wages and income have not risen,” even though employment rates have increased since the dark days of the recession, he says. Many people who lost full-time jobs back returned to the employment market, but only as part-timers   

“In some cases wages are below 2008 levels. We need to see positive movement there to sustain car sales going forward. It’s a critical issue.”

He cites a worldwide job market as a factor for overall softer wages in the U.S. “We’re seeing the effects of globalization of every job. It’s putting the pressure on.”  

Otherwise, it’s mostly good news voiced at the convention’s kickoff. Dealers are enjoying the benefits of a strong automotive market.

Pointing to low gasoline prices and pent-up consumer demand, NADA predicts U.S. light-vehicle sales of 16.9 million units in 2015. If that happens, it would represent the sixth consecutive annual increase. Last year, automakers and dealers delivered 16.5 million new cars and light trucks.

NADA expects dealers to sell more trucks and SUVs (56%) than cars (44%) because of lower gasoline prices, increased job growth and an improving housing market, although Szakaly says that market, like wage rates, could be better.

“Consumers are more able to spend for extras because of declining gasoline prices and continued low interest rates,” he says.

He adds: “We expect to see significant growth in sales of light trucks, particularly in the large-size CUV and SUV segments.

His reasoning: “Consumers like the utility and comfort that larger vehicles provide. Lower gasoline prices accelerate that shift.”

Expect the pickup truck segment to benefit from an improving housing market, with segment sales climbing to 15.2% this year from 13.7% last year.  

This year’s losers look like small and midsize cars. Szakaly expects incentives to rise on those vehicles to bolster sagging sales. Hybrid sales are expected to suffer as a result of low fuel prices.

“The one area where prices and segment share are likely to remain stable is in the luxury segment,” he adds. “A strong luxury brand, in any retail business, will hold extra goodwill that a consumer is willing to pay for.”

NADA’s economic outlook calls for a 3.1% increase in the gross domestic product in 2015. Szakaly foresees a potential for growth to boost the GDP even higher.

“The U.S. economy is poised to accelerate in 2015. The only negative remains stagnant wages,” he says. “If we see some sustained rise in incomes, GDP could easily exceed our forecast.”

As dealers enjoy increased sales, buyers will derive benefits too, Szakaly says. “It will be a good year for consumers, with great products that last longer, are more fuel efficient and are safer than ever before.”

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