Accelerating car sales aid economy

Early reports out Wednesday showed a significant strengthening of the economy last month, with another double-digit increase in auto sales and the largest gain in small-business jobs in three years.

The news helped spark a big stock rally, sending the Dow Jones industrial average up by 250 points, or 2.3 percent, to 11,256 - its biggest one-day gain since September.

Especially welcome news to investors was a report from the ADP payroll-processing firm showing a jump of 93,000 jobs among small businesses - an unexpectedly strong gain that economists say may foreshadow a pickup in overall job growth in a key report due out Friday.

“The labor market appears to have improved noticeably since the summer,” said Ryan Sweet, economist at Moody's Analytics, noting that ADP also increased its estimate of October job gains by 41,000.

The better-than-expected job growth prompted Moody's to revise its estimate of private job gains in Friday’s scheduled Labor Department report to 180,000 - making it possibly one of the best months for jobs in the recovery so far.

The brightening jobs picture came as Detroit’s automakers reported a second month of sharp gains in auto sales in November, led by a 20 percent jump in sales at Ford Motor Co., compared with the same month a year ago. Sales at General Motors and Chrysler LLC rose 11.4 percent and 16.7 percent, respectively, and overall U.S. sales rose 17 percent.

“Consumers are still cautious, but we’re starting to see people who show an inclination to come back into dealerships and back into malls,” said GM executive Jim Bunnell. GM reported increased traffic in its showrooms at the end of last month after its highly publicized stock offering.

“As we go into 2011, we’re going to continue to see a nice improvement,” Mr. Bunnell said.

Detroit’s automakers also are gaining in part as a result of Toyota’s woes. Toyota, once a contender for the No. 1 spot in U.S. auto sales, actually saw a drop of 3.2 percent last month as its reputation continues to be hurt by a series of safety defects and recalls.

Ford has been the biggest beneficiary of Toyota’s problems as well as of GM’s fall into bankruptcy last year, which enabled Ford to reclaim the No. 2 spot in sales behind GM. But other Asian automakers also have benefited, most notably Korean automaker Hyundai, whose sales soared by 45 percent last month.

“The economy is growing, and the demand for new vehicles is increasing,” said Ken Czubay, Ford vice president, who said his company’s sales in the Washington area zoomed up by 29 percent because of growing demand for fuel-efficient vehicles. He expects 2010 to be one of Ford’s “best years ever.”

With sales of cars and trucks running close to a 12 million annual rate, all the automakers clearly are on the road to recovery from the dismal levels of below 10 million set during the recession. GM and Chrysler both announced this week they are hiring an additional 1,000 engineers and technical staff to design the high-tech cars of the future.

The improved fortunes in Detroit have been fueling steady gains in manufacturing overall, making it one of the most consistent sources of strength in the economy this year.

“Manufacturing continues to benefit from the recovery in autos,” said Norbert Ore of the Institute for Supply Management, which issued a report Wednesday showing that factories kept humming in November.

The comeback in the auto industry is not being fed by loose credit as it was earlier in the decade, but by the need to replace an aging fleet of vehicles, analysts say. People held onto their older vehicles so long during the recession that they now average about 10 years of age.

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