AMERICAN DEMOGRAPHICS 2014

WEST: A POSITIVE Outlook

ECONOMIC OVERVIEW

While the recovery of the jobless rate in the West continues to lag notably behind the country’s three other Census regions, consumer confidence blooms here. Are Westerners simply more optimistic?

“For the last 30 years the West’s economy has been totally transforming,” says Ken Goldstein, economist with The Conference Board, an independent business membership and research association. “A lag in manufacturing has affected southern California while prosperity in northern California balances that out—the Golden State isn’t as shiny as it used to be and that has benefitted places like Utah and Colorado with a population that has left for greener pastures.”

UNEMPLOYMENT RATE

While the jobless rate has been on the decline in the West for the past five years (when it spiked up from 5.8% in May 2008 to 11% in May 2010), it still remains the highest of any Census region. In June 2014, the West’s unemployment rate was a much-improved 6.7%, according to the Bureau of Labor Statistics (BLS), though still higher than the U.S. average of 6.1%.

CONSUMER CONFIDENCE

Despite the region’s higher jobless rate, residents of the West remain more confident about the economy than most other regions. In fact, the Conference Board’s Consumer Confidence Index (CCI) in the West’s Mountain region rose to 92.7 in May 2014. This is an applause-worthy increase over the region’s 58.7 CCI reported in May 2012 and a healthy comparison to the CCI of the overall U.S., which was 83 in May 2014.

While consumer confidence in the West’s Pacific region is not as strong as West Mountain—83 in May—it was still high compared with the other regions of the U.S., such as the Middle Atlantic (71.6) and East South Central (72.1).

Looking at Western consumers’ confidence about the future, the West’s Expectation Index was also strong, with Expectations ringing in at 92.7 in the Mountain region and 88.8 in the Pacific region in May 2014. Those compare to an Expectation Index for the overall U.S. of 84.8 in May.

COST OF GOODS

Similar to the rise in the Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) in other regions across the country, the West’s CPI tipped up by 2.3 percent from June 2013 to June 2014. This movement ushers in a bit of inflation for the residents of this region.

RETAIL REAL ESTATE

With a steady boost in asking rents and a continued decline in vacancy rates, the West has strong commercial real estate markets. Throughout the region, its affluent major metros are the catalyst for growth.

“In the West, markets like Orange County, San Diego, and northern and southern California are still strong, with San Francisco and San Jose near the top of the list,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information. “These markets are all stronger than the rest of the West, but this is a reflection of the wealth and purchasing power in markets like that.”

VACANCY RATES

The region reported a commercial real estate vacancy rate of 8.6% for the first quarter of 2014, according to Reis, Inc.

This number was slightly lower than the 9.1% reported in the first quarter of 2013 here—and notably lower than the vacancy rate reported for the overall U.S. (10.4%) reported in the first quarter of 2014.

RENTS

Although the growth is slow, asking rents in the West are also moving in a more positive direction. Asking rents increased to $23.64 in the first quarter of 2014 as compared with the asking rent of $23.31 reported in the first quarter of 2013, according to Reis, Inc.

These numbers are markedly higher than the asking rent reported for the overall U.S., which was $19.42 for the first quarter of 2014.

METRO MARKETS

While recovery and growth are on the docket for many of the West’s major metros, some of the region’s less affluent cities are still struggling.

CITIES TO WATCH

In northern California, the boomtown of San Francisco had a remarkably low vacancy rate of 3.4% for the first quarter of 2014, according to Reis, Inc. The City by the Bay also pulled in an impressive rental rate of $33.51 per square foot in the same time period. San Francisco also had a low unemployment rate of 4.3%in June 2014.

The tech center of San Jose also boasted a low jobless rate of 5.5% in June 2014, as well as a healthy vacancy rate of 4.6% for the same time period, along with a rental rate of $31.38.

Down south in Orange County, where the jobless rate was 5.2% in June 2014, the vacancy rate dipped down to 5.3% and the rental rate rose up to $31.32 per square foot in the first quarter of 2014.

In the Mountain states, Denver had a less healthy vacancy rate of 10.9% and a lower rental rate of $17.35 per square foot, but its jobless rate was exemplary at 5.3% in May 2014.

HANGING LOOSE, HANGING ON

Bucking the trend for new frames with new Rx’s, the West was the only region to increase lens-only refills. The new frame figure dropped from an all-time high of
95%
last year to
93%
this year. But even with that decline, the West still leads the nation in new eyewear rather than refills.

CLIMBING PRICES

Always a trendsetter, the West is heading up market with the most reported plans to expand to higher-priced frames this year. Climbing from 20% last year, 33% of respondents will be taking the higher road when it comes to pricing this year.

COMPUTER-EYES-ED

The Silicon Valley must be influencing the entire Western region: the area leads the nation by a program-crashing 10% over the national average as computer glasses comprise 28% of second-pair sales.

FASHION TRENDS

While the West‘s fashion followers pay homage to each season’s fashion trends, they spin them in their own, much more casual and colorful way. One of fall’s key style trends that suits the West well is Eastern Eclipse—a trend story that has Asian and Russian influences.

“We are seeing kimono looks, wrapping, asymmetrical cuts, chrysanthemum and dragon emblems, embroidery that has Asian influences, and even a Russian rose influence,” says Roseanne Morrison, fashion director at The Doneger Group, a New York City-based trend and color forecasting service. “A lot of this is coming from Japan, too, but it’s still modernized for the women of right now.”

In Focus

LENS MARKET

FREE-FORM: Free-form is not as popular here as in other regions, but it has been making steady progress. This year, 39% of lens sales were of the free-form variety, and while that makes the West number three overall among the regions (but ahead of the Northeast), that 39% is free-form’s strongest showing yet.

PALs: After some steady growth in 2012 and 2013, PALs experienced a slight downward tick this year, being chosen by 71% of presbyopes here versus 73% last year. Bifocal and trifocal lenses, therefore, saw a spike in sales, jumping from 22% last year to 26% of the multifocal market this year.

MATERIALS/EXTRAS: Poly tops the list here for most-used material, cited as such by 55% of respondents—a number that has slowly grown over the past two years. After two years of increases in popularity, Trivex experienced a dip in the West this year, cited as most-used material by 12% of those surveyed. That’s an 11-point decrease from last year. Like every region, AR is the top-selling extra here. But the West’s AR numbers are not as strong as elsewhere in the nation. However, with 81% of respondents citing AR as their most popular extra (a tie for third place among the regions), it has made strides, gaining 12 percentage points in two years.

After being bumped off its throne last year by the South, this region regained its lead in photochromic sales. Nineteen percent of ECPs noted it as their “most-sold” extra, and while that’s a strong showing, it’s not as strong as 2012 when photochromics were the most-sold extra in 24% of shops.

FRAME FOCUS: THE LATEST IN THE WESTERN FRAME MARKET…

ON THE EDGE: WEST REGION

DO I EDGE IN-HOUSE?

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

+ MORE: 14%

- LESS: 10%

= SAME: 23%

INTENT TO START IN-HOUSE LAB SERVICES IN 3 YEARS

EDGING
22%

SURFACING/CASTING
8%