NORTHEAST: Mixed Signals

ECONOMIC OVERVIEW

The Northeast reports the second-highest unemployment rate of all U.S. Census regions, a very different position than last year when it boasted the lowest jobless rate of any region. This new reality has given its residents a more cautious outlook on the economy.

Augusta, Maine

Tough economies and higher unemployment dings confidence in last year's strongest region, but hopes are on the rise for better things to come

JOB LOSS

While the Northeast's unemployment rate eased slightly from 8.1 percent in April 2011 to 7.9 percent in April 2012, according to the U.S. Department of Labor's Bureau of Labor Statistics (BLS), this region still reports a rate higher than those in the Midwest and South. It is second only to the concerning jobless rate of 9.5 percent in the West. Still, it is lower than the overall U.S. rate, which was reported as 8.2 percent in May 2012.

Within the Northeast region, April 2012 unemployment numbers also showed that some states, such as Pennsylvania (7.4 percent), Connecticut (7.7 percent), Maine (7.2 percent), New Hampshire (5.0 percent), and Massachusetts (6.3 percent), got a reprieve. In addition, Vermont (4.2 percent) laid claim to an impressively low jobless rate.

But other states, such as New Jersey (9.1 percent), New York (8.5 percent), and Rhode Island (11.2 percent), were hit with much tougher economies and, thus, higher jobless rates.

BUILDING CONFIDENCE

Even while unemployment numbers remained high in the Northeast, its residents' confidence in the economy continued to increase.

In May 2012, a surprising 34.4 percent of consumers said they were “Confident” or “Very Confident” about the chances for a strong economy during the next six months, according to the BIGinsight Monthly Consumer Survey.

This number, which rings in at 32.4 percent for the overall U.S., is up a noticeable amount from the 31 percent who felt the same way in the Northeast in May 2011.

SPENDING OUTLOOK

While the economic outlook is more positive in the Northeast than it has been in several years, an increasing number of people say they have become more practical and realistic in their purchases (up to 46.2 percent from 42.1 percent in 2010), according to the BIGinsight survey.

A full 42 percent also say they have become more budget conscious, up from 36.3 percent in 2010. According to the BIGinsight survey, 26.3 percent said they are doing more comparative shopping online (up from 19 percent who said the same in 2010) and 36.1 percent said they are using more coupons (up from 30.9 percent in 2010).

COST OF GOODS

While the jobless rate remained high in the Northeast, consumers also got crunched by inflation as the Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) for All Urban Consumers (88 percent of the population) edged up by 2.3 percent for the year ending in April 2012, according to the BLS. Regional prices also rose by 0.3 percent from March to April 2012.

The overall U.S. CPI also increased by 2.3 percent in the same timeframe.

RETAIL REAL ESTATE

The current undesirable unemployment rates in the Northeast haven't taken much of an additional toll on this region's retail real estate market, which reports a nine percent vacancy rate for the first quarter of 2012 compared with the 10.9 percent rate for the entire U.S., according to Reis, Inc., a New York City-based real estate forecasting firm.

VACANCY RATES

The Northeast's retail vacancy situation hasn't changed much in the past two years—the vacancy rate has hovered around nine percent since the first quarter of 2010.

Boston

“You tend to see lower vacancy rates in the Northeast, in general,” says Ryan Severino, a senior economist with Reis, Inc. “The market here, especially in metros like New York and Boston, tends to have enough affluent, recession-resistant consumers to make the region's retail real estate market a little more resilient.”

RENTS

Effective rents remain healthy here, too, with the average ringing in at $18.05 per square foot for the first quarter of 2012. Severino sees a slow but positive recovery in the retail real estate market—one he estimates will continue.

By the year 2021, Reis, Inc., projects that effective rents will rise up to $25.10 per square foot. The firm also projects vacancy rates to dip down to 6.4 percent by 2021.

METRO MARKETS

The Northeast boasts a plethora of major metros, several of which have become standout examples of a market in recovery. A few saw significant increases in retail rents and decreases in vacancy rates.

CITIES TO WATCH

Boston was booming in the first quarter of 2012 with a seven percent vacancy rate, compared with the Northeast region's nine percent rate, according to Reis, Inc. Additionally, Boston rang in a rent of $21.77 per square foot in the first quarter of 2012, a 0.8 percent increase over the first quarter of 2011.

The Philadelphia market was also one to watch with an effective rent of $19.77. Similarly, the behemoth Northern New Jersey market saw vacancy rates dip to 5.7 percent while its rents topped out at an impressive $27.71 per square foot.

Some of the Northeast's cities had mixed results. Rhode Island's capital Providence saw a sky-high vacancy rate of 13 percent while its rents were up slightly.

FASHION TRENDS

At the forefront of style, the Northeast is invariably the first region to adopt fashion's finest trends. “While the color trend that is happening in jeans right now will appeal to every region, the Northeast will embrace bolder, more fluorescent tones,” says Roseanne Morrison, fashion director at The Doneger Group, a trend and color forecasting service, who also notes that fashion followers in this region will support the season's color-blocking trend but with bright, daring contrasts.

Morrison also says that menswear prints such as houndstooth, a part of the popular film noir direction, will be bigger and more graphic in the Northeast. EB