This edition of the Auto Market Weekly Summary includes updates on new-vehicle sales, pricing and incentives for May, and updates on job creation and unemployment. Gas prices have moderated towards $4.25 nationwide over the latest week, but consumers are still spending significantly more on energy, impacting their ability to spend on other discretionary items and big-ticket goods.

The May jobs report delivered a genuine upside surprise, with nonfarm payrolls rising 172,000 against expectations of 88,000. The report included significant upward revisions to March and April, pushing the three-month average to 188,000, the strongest reading since January 2025. For auto dealers, the headline is a positive note: A healthier labor market supports consumer confidence and big-ticket purchase intent.

The bond market’s reaction, however, tells a more complicated story. The strong report drove Treasury yields sharply higher, with the 10-year approaching 4.54%. Fed funds futures are now implying a potential hike by year-end 2026 and possibly one additional move in 2027. Financing costs, already a persistent headwind, are unlikely to ease anytime soon.

In the vehicle market, the seasonally adjusted annual rate (SAAR) of new-vehicle sales in May came in at 16.1 million, up 3.2% year over year and aligned with the Cox Automotive forecast. The 2026 SAAR is now averaging near 15.7 million through May. Pricing trends moderated in May, with transaction prices holding under $50,000 and incentive spending on the rise.

Price pressure is showing up beyond the automotive showrooms. Executives at major public retailers — including Dollar General, Five Below, Ollie’s, Macy’s, and Ulta Beauty — have cited elevated fuel prices as the single largest consumer headwind, consistent with the Federal Reserve’s May Beige Book. The income bifurcation that has defined this market has escalated since the Middle East conflict began and is becoming more entrenched: Lower-income consumers are under meaningful stress, middle-income households are deferring non-essentials, and even higher-income consumers are turning cautious.

For dealers, the picture heading into summer is one of genuine crosscurrents. New-vehicle demand at the higher end of the market remains. Used-vehicle demand and trade-in values continue to benefit from substitution effects. Credit availability remains near multi-year highs. But gas prices near $4.25 nationally, rising Treasury yields, and consumers increasingly cautious on discretionary spending are creating real headwinds for volume in the mid-market. This week’s Consumer Price Index (CPI) and Producer Price Index (PPI) releases will be the first comprehensive read on inflation pass-through from the energy price shock and will likely shape the rate outlook for the remainder of 2026.

New-vehicle sales in May were in line with our expectations, supported in part by the wealth effect from elevated equity prices.

• May SAAR finished at 16.1 million, a strong result given the negatives news from the Middle East and lower consumer confidence.  
• Sales volume was 1.47 million units, slightly higher than year-ago levels but up 7% from April. May had 26 selling days, one day less than May of 2025 but flat to April levels.
• Retail SAAR in May was estimated at 13.4 million, higher than last May’s 12.7 million pace.
• Fleet sales rose 2% year over year, per Bobit, reversing the decline seen last month, as sales into rental fleets rose nearly 4%, rebounding from lower April sales. Sales into commercial and government fleet were both down against May of last year.
• On a year-to-date basis, fleet sales are up 3.3%, led by a 7% gain in the commercial fleet segment.
• Fleet share was estimated at 17.9% in May, down from 18.8% last May. The fleet SAAR declined to 2.7 million, down nearly 7% year over-year.

Manufacturers eased off the pricing discipline recorded in April, leaning on incentives to support stronger May volume. Average transaction prices (ATP) continue to hold below $50,000.

• ATP in May was $49,220, down 0.5% month over month from April’s revised-lower number.
• ATP was higher by 1.2% year over year, a further deceleration from April’s 1.8% gain, suggesting the recent pace of annual price appreciation is moderating.
• Average incentives rose to $3,499 in May, up 5.5% against last year. Incentives as a percentage of ATP climbed to 7.2%, up from April’s 6.9% and above last year’s 6.7%.
• The Kelley Blue Book ATP report will be published on June 9.

The May jobs report came in stronger than expected, with upward revisions to both March and April. Some of the best job gains were seen in the food services, local government, and healthcare. Jobs in the financial services sector declined in the month, while automotive dealer jobs also declined.

• The unemployment rate held at 4.3% for the third consecutive month, showing very little change over the last six readings. The unemployment rate is lower by 10 basis points year over year. 
• The labor force participation rate remained at 61.8%, its lowest reading since 1977 outside of the pandemic (2020).
• Average hourly earnings rose 0.3% month over month, pulling the year-over-year growth rate down to 3.6%. With the Personal Consumption Expenditure (PCE) index higher by 3.8% against last year, this implies negative real wage growth for consumers.
• Nonfarm payrolls rose 172,000 in May, significantly stronger than the 88,000 gain expected. The gains were led by leisure and hospitality, adding 70,000 jobs overall driven by growth in accommodation and food services. Government positions also increased by 52,000 jobs, with the highest growth in the local government segment. Offsetting the positive results, jobs in finance and insurance declined by roughly 20,000.
• Prior-month revisions were overall higher by 93,000. The three-month rolling average of jobs created rose to 188,000, the highest reading since January 2025 and much closer to the long term run rate, aided by the significant revisions to the data.