AMERICAN DEMOGRAPHICS 2014

MIDWEST: RECOVERING WITH Confidence

ECONOMIC OVERVIEW

Things are looking up—finally—in the heartland. As the jobless rate dipped further down to a healthier status in the Midwest region, confidence buoyed even though inflation rose slightly. “The Midwest was not hit as hard by the housing debacle and, thus, it will not need to recover as much as other regions,” says Ken Goldstein, economist with The Conference Board, an independent business membership and research association. “I also believe certain areas of this region are poised to see a pickup in consumer spending.”

JOB LOSS

The Midwest saw its jobless rate drop from 7.3% in June 2013 to 5.9% in June 2014, according to the Bureau of Labor Statistics (BLS). While unemployment continues to decline across the country, the Midwest is seeing some of the lowest rates.

“The economic evidence suggests that the economy has begun an upswing from the difficult winter and perhaps from the long subpar expansion,” says Jack Kleinhenz, Ph.D., chief economist at the National Retail Federation (NRF).

MIDWEST STATES

States that rose to the top of the recovery include North Dakota, which boasted an unemployment rate of 2.7% in June 2014, according to the BLS. Other states with a healthy unemployment rate for the same time period included Nebraska (3.5%), South Dakota (3.8%), Iowa (4.4%), and Minnesota (4.5%).

States that didn’t fare as well in June include Michigan (7.5%) and Illinois (7.1%).

CONSUMER CONFIDENCE

With the lowest overall unemployment in the country, the Midwest is sitting pretty and residents know it. As such, consumer confidence is high in some areas here, especially as compared with the Consumer Confidence Index (CCI) of the overall U.S., which rang in at 83 in May 2014.

In the Midwest’s West North Central region, the CCI reached an impressive 106.3 in May 2014, according to The Conference Board. This is up significantly from both May 2012, when the CCI here was 81.7, as well as May 2013, when the CCI was 94.2. This region also has exceedingly high hopes—the Expectations Index here was 121.2 in May, up from at 84.7 in May 2012, according to The Conference Board’s Consumer Confidence Survey.

In this Census Region’s more urban East North Central area, consumer confidence was significantly lower, stalling at 79.4 in May 2014. Still, CCI continues to rise here—it is up from 58.6 reported in May 2012 and 77.7 in May 2013.

COST OF GOODS

Like most other regions, the heartland saw a rise in inflation for the first time in awhile. The Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) for All Urban Consumers rose to 1.7 in June 2014 over June 2013, according to the BLS. This was notably more than the overall national CPI increase.

RETAIL REAL ESTATE

While the jobless rate and consumer confidence are looking up, the commercial real estate market here continues to lag behind. “The Midwest is still having issues with its underlying economics and demographics,” says Ryan Severino, a senior economist with Reis, Inc., a provider of commercial real estate information. “This region is still dealing with the fallout of the contraction of its manufacturing economy.”

VACANCY RATES

One of the economic downturn holdouts in the Midwest, the region’s vacancy rates for commercial real estate continue to wobble around the 12% mark. Reis’ Regional Retail Data Report reveals this is notably higher than the overall U.S. vacancy rate, which came in at 10.4% in the first quarter of 2014.

RENTS

Perhaps doing only slightly better than vacancy rates, retail real estate rents are only slowly ticking upwards in the Midwest. In the first quarter of 2014, Reis reported the asking rent for this region at $16.17, just slightly up from the first quarter of 2013, when asking rents rang in at $15.96.

METRO MARKETS

While recovery in retail real estate is slow to come in the Midwest, some urban areas are faring better than others. “Chicago is doing pretty well—it’s a strong regional business hub,” says Severino.

CITIES TO WATCH

While Chicago’s retail real estate vacancy rate is on the rise—up to 13.2% in the first quarter of 2014 over the 11% reported in first quarter 2013—its rents are tipping up ever so slightly. The windy city’s jobless rate also saw a nice decline to 7.1% in June 2014 versus 9.1% in April 2013.

Things looked a little sunnier in Cincinnati, as well, where asking rents increased by 1.8% over first quarter 2013 to $15.01 in the first quarter of 2014.

The vacancy rate also dropped slightly here, down to 12.5% in the first quarter of 2014. The jobless rate was also promising—at 5.1% in May 2014 down from 6.6% in April 2013.

BOTH SIDES NOW

When it comes to pricing, numbers are on the move in the Midwest, as those who reported retaining the same pricing structure dipped by 10% to 49%. The new option most noted by respondents in the region, 24% this year compared to 14% in 2013, is the expansion to both higher and lower price points.

FASHION TRENDS

Clued into trends earlier via the Internet and social media, the formerly style-lagging Midwest is latching onto key trends in a more timely fashion than ever before.

One of the best fall trends for the Midwest will be a chic frontier theme with Western-inspired casual looks such as maxi-skirts and romantic blouses in neutral colors, including earthy tones such as taupes and tans.

“This trend is universal across the U.S. but it will be adopted in different ways in different areas,” says Roseanne Morrison, fashion director at The Doneger Group, a trend forecasting service.

In Focus

LENS MARKET

FREE-FORM: The percentage of free-form/digital lenses within total lens sales has been a bit of a seesaw in the Midwest over the past five years, some years leading the regions in sales percentages and others falling behind. This year, the region hits the “average” mark, with free-form lenses making up 40% of total sales. The good news? That’s up a full seven points over last year.

PALs: The Midwest saw a jump in PAL sales this year, coming in at 72% of its multifocal lens market. That represents quite a jump over last year’s 66%…but it’s still falling just short of the region’s peaks in 2011 and 2012. The sales of bi- and trifocal lenses made up 26% of the multifocal market this year, finally leveling off after three years of slight but steady increases.

MATERIALS AND EXTRAS: The popularity of polycarbonate has held steady in this region, with 56 percent of ECPs noting it as their most-used material (55% in 2012). After losing ground here between 2012 and 2013, Trivex is making a comeback, ranked as most-used by 17% of surveyed ECPs. That’s up from 14% last year, but still down from 2012’s 22%.

The use of AR has also not fluctuated much here. This year it was reported as the “most-sold” extra by 80% of respondents, a number similar to past years. Photochromics enjoyed increased success in the Midwest this year, as the “most sold” extra by 17% of respondents (that’s second in the nation!). Photochromics have enjoyed a steady growth here over the past three years—5% in all. Conversely, polarized has dropped in popularity here, noted as “most-sold extra” by only 1% of ECPs, as opposed to 4% last year and 7% in 2012.

FRAME MATERIALS: A CLOSE-UP ON FRAME TRENDS IN THE MIDWEST

ON THE EDGE: MIDWEST REGION

DO I EDGE IN-HOUSE?

# OF JOBS EDGED IN-HOUSE (COMPARED TO LAST YEAR)

+ MORE: 19%

- LESS: 10%

= SAME: 20%

INTENT TO START IN-HOUSE LAB SERVICES WITHIN 3 YEARS

EDGING
12%

SURFACING/CASTING
3%