NerdWallet's Smart Money Podcast - Money News: Capitalize on New Car Price Drops and Job Market Resilience

Episode Date: February 14, 2024

Learn why now may be a good time to be in the market for a new car and why two industries are outliers in job layoffs. Why did new car prices drop in January? What’s driving layoffs in tech and media — and what does it mean for other jobs? Hosts Sean Pyles and Anna Helhoski discuss car prices and a recent surge in layoffs, particularly in the tech and media sectors. They kick off with an in-depth look at the auto industry, unraveling the reasons behind a significant drop in new vehicle prices and the impact of credit-tightening on car loans. The hosts share three key takeaways, emphasizing the implications for consumers looking to purchase a new car. Then, Sean and Sara delve into the complex landscape of layoffs, dissecting the trends in tech and media job cuts. They discuss the factors contributing to the tech industry's layoff spree and the challenges faced by the media sector, shedding light on the broader job market resilience despite specific sectorial challenges. In their conversation, the Nerds discuss: car prices, layoffs, auto industry, credit-tightening, job market trends, tech layoffs, media job cuts, labor market resilience, interest rates, new vehicle prices, manufacturing, economic growth, consumer confidence, Dealertrack Auto Credit Total Loan Index, credit availability, inflation, economic indicators, stock market, personal finance news, job market analysis, economic outlook, job gains, unemployment rate, and financial trends. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Hilhoski. And this is our weekly personal finance news roundup, where we take a look at recent developments in the world of money and then go in-depth on an issue that's important to your life and your bottom line. Today, we're going to examine all the headlines around layoffs, where they're happening and what it means for the overall economy. First, we're going to take a look at some newsy numbers around the auto industry,

specifically car prices. You buying a new car, Sean? Fortunately, no, but the auto industry, manufacturing, sales, and service makes up 3% of the country's gross domestic product. That may not sound like much, but in 2022, that was 13.75 million cars and light trucks. That's a lot of jobs, and it's a huge engine, sorry, of economic growth. So what do we have this week? Well, we have numbers on what new vehicles cost in January, and prices fell 2.6% from December to an average of $47,400. That is still a lot of money for a car, but we haven't seen prices that low since May of 2022. Well, that's good news for anyone in the market for a car.

Yeah. And also dealers issued a lot of incentives, meaning they dropped sales prices from what manufacturers suggested. The dealer eats that cost. So why this drop in prices, Sean? Is it simple supply and demand? Yeah, weaker demand in part because of all that nasty weather the country had in January. People didn't want to hang out at car lots and in showrooms with plunging temperatures and snow and ice on the roads. It's also because of something known as credit tightening. Huh.

Explain, please. OK, credit tightening is basically that there isn't as much available credit to consumers. It's harder to get. So car loans were a bit tougher to get in January, as were all kinds of loans. Something called the Dealer Track Auto Credit Total Loan Index dropped by 1% last month, to a level it hasn't been since August of 2020, in the middle of the pandemic. So if you wanted to buy a car but didn't have all cash, you might have confronted this tighter credit situation that made it more difficult to get a loan, depending, of course, on everything from interest rates

to your credit score and more. Ergo, no sale. Exactly. It certainly does not mean that nobody bought cars last month. Plenty of people did. But it's possible that not as many people did because of those factors. And that meant a

bit less spending on a big ticket item that helps run the economy and keeps people in manufacturing and sales jobs. All right. Well, thanks for that, Sean. And now on to our in-depth look at layoffs and what to expect from the job market this year. The job market has remained remarkably tight for a couple of years now. The unemployment rate has hovered between 3.4% and 3.9% since December 2021, and job gains in January were double the expected amount. So, Ana, if the labor market appears this strong, why are we seeing daily dire headlines about layoffs? It's a curious thing, isn't it, Sean?

But there's actually a pretty easy answer as to why we're seeing more news stories about job cuts. It's because those layoffs are happening in some of the most visible fields on the internet, tech and media. So what you're seeing about job cuts are actually pretty siloed. From 2022 to 2023, the U.S. labor market did see a 10% increase in layoffs, but federal data shows it was concentrated mostly in information, which includes both tech and media. Okay, that makes sense. Although I've seen some other big companies outside of that information sector announcing job cuts.

Most recently, UPS, American Airlines, Citigroup, etc. So what's going on there? So economists I've spoken with have told me that layoffs in other sectors, like banking or travel, for example, are probably due to normal churn in the job market rather than an indication of some broader trend. So they're outliers. All right, then let's break down what's happening in tech and media. Starting at the end of 2022, tech companies have been shedding employees. Over 260,000 workers in tech lost their jobs in 2023, a 60% increase from 2022.

And that's pretty wild considering the number of tech layoffs in 2022 was more than in 2020 and 2021 combined. The biggest companies saw the most workers laid off last year, like Amazon, Meta, which owns Facebook and Instagram, as well as Google and Microsoft. So, Ana, what's behind the tech layoff spree? I've been tracking tech layoffs for a while now, and it seems like those job cuts are largely due to the hiring blitz that tech companies went on during the early days of the pandemic as demand for things like e-commerce rose. At the time, interest rates were really low too, so companies expanded. But things have changed. Inflation started increasing costs in 2022, then rates grew, so companies started pulling back. In corporate speak, it's called restructuring. That trend

doesn't look like it's going anywhere, according to my sources. As of recording, more than 140 companies have laid off over 34,000 workers this year, according to layoffs.fyi. But there is one bright spot. Experts I've spoken with told me that workers don't seem to be out of a job for very long. So they're either being scooped up by other tech companies and staying within the information sector,

or their skillset make them attractive candidates for IT-related positions at businesses outside of tech. Okay, so that's tech. What about media? Media is, in some ways, the sadder story, as its workforce has seen declines for many years. Layoffs come down to a lack of a working business model in digital media. Traditional media, like newspapers and magazines, were funded through subscriptions and ads. Neither works very well on the internet. Media companies also face algorithm challenges from Google and social media, which means scrambling for readership. So as a result, media companies are losing money, and that means they've made

serious staff cutbacks. I'm thinking of BuzzFeed, Vox, Time Magazine, Forbes, Business Insider, Sports Illustrated, NPR, Vice, Pitchfork. Exactly, Sean. You could go on and on. And even the let a billionaire buy the company model doesn't seem to work very well either. The Washington Post, which is now owned by billionaire Amazon founder Jeff Bezos, had a big round of buyouts last year and uproar from workers. And the Los Angeles Times, which is owned by billionaire biotech investor Patrick Soon-Shong, just had mass layoffs, about 20% of its staff. And that's after it cut 13% of its staff back in June. The paper was apparently losing $30 to $40 million a year. Yeah. Over the past year,

an estimated 3,000 media workers lost their jobs. In January, an estimated 500 plus journalists lost their jobs. And since the vast majority of media outlets haven't figured out how to be profitable, it's likely this trend will continue. Yeah, I think that's the likeliest read. But I'd like to reiterate that in spite of high profile layoffs in tech and media, we aren't seeing trends in other job industries. When you look at Bureau of Labor Statistics data for 2023, monthly layoffs and discharges were actually slightly below pre-pandemic levels. So that's a pretty good sign as we head deeper into 2024. But is it possible that other industries will follow suit this year? Well, that's a crystal ball question, Sean. In lieu of either of our abilities to foretell the

future, we can read the current situation. And what we do know is the labor market has been incredibly resilient, despite some pressure from inflation and interest rate hikes that we saw in the last two years. So listeners, there are no guarantees. But for now, workers are in a pretty good situation. That's it for this week's money news. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or send us a voice memo at podcast at nerdwallet.com. And remember to follow, rate and review us wherever you're getting this podcast. Today's episode was produced by Tess Figland

and edited by Rick Vanderknife. Sarah Brink makes our audio. Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.