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U.S. Jobless And Demographics May Derail Sales Rally

Non-College Majority Buy More Cars But Suffer Rising Unemployment

Forecasters are scrambling to raise their forecasts for the booming U.S. car market, but PriceWaterhouseCooopers’ Autofacts has a cautionary tale to tell; the rally won’t return to previous peaks if unemployment continues to hit the poorly educated majority of the workforce disproportionately.

As the U.S. economy relies more and more on the less than 30 per cent who are college educated to fill jobs, the less educated, who buy more new cars, will be marginalised and hit harder by rising employment.

 “The U.S. economy has not expanded rapidly enough to substantially reduce long-term unemployment, nor support a robust U.S. auto market rebound,” Autofacts said in a report.

“In fact, slight near-term improvements in unemployment were partially due to workers permanently exiting the job market or discouraged workers simply ending the search for employment,” the report said.

The U.S. light vehicle sales are expected to reach around 13 million in 2011, up 12 per cent from 2010. U.S. light vehicle sales hit a 27-year low in 2009 of about 10.5 million, after peaking close to 17 million in the early 2000s.

Fewer opportunities
Autofacts said as the economy grows, millions of job-seekers pursue fewer employment opportunities in an economy that has shifted towards services requiring advanced education. The average unemployment rate for non-college graduates – 70 per cent of the U.S. population and accounting for 43.9 per cent of new car sales – was 10.4 per cent in the first quarter of 2011. The average unemployment rate for college graduates – who buy 56.1 per cent of new cars – was 4.3 per cent during the same period.

“Since 2000, the U.S. market has relied increasingly on less than one-third of the population to consume more than half of all new cars. This trend is compounded by the expectation of high unemployment for several more years. The result is an unsustainable equation that may prevent the U.S. sales topline from returning to prior peaks,” the report said.

Autofacts said a valuable segment of mainstream auto consumers may struggle to participate in what it called the next economic era, unless they are retrained, or somehow receive advanced education.

Neil Winton – May 15, 2011

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