MIDWEST: Marching in Place
ECONOMIC OVERVIEW
The heart of the country, the Midwest region has seen notable recovery since 2009 when the floor fell out of the economy. Still, it’s been a mixed bag here on a number of economic fronts in the past year, including the unemployment rate.
JOB LOSS
While the other U.S. Census regions saw more marked declines in their unemployment rates from April 2012 to April 2013, the Midwest only saw its jobless rate drop from 7.3 percent in April 2012 to 7.2 in April 2013, according to the Bureau of Labor Statistics (BLS). This region’s jobless rate seems to be stuck there, however, hovering around this point—at least for now.
“In the Midwest, in the last six months the unemployment rate of around 7.2 percent has been below the nation’s average; but wage and salaries have sputtered along the lower range of wage and salary growth,” says Jack Kleinhenz, PhD, chief economist at the National Retail Federation (NRF). “Wages and salaries grew only 1.4 percent in the first quarter, compared with the same quarter a year ago.”
MIDWEST STATES
States that showed highly promising signs of recovery include: North Dakota, with a reported unemployment rate of 3.3 percent in April 2013, according to the BLS; Nebraska, with a rate of 3.7 percent; and South Dakota, which reported a jobless rate of 4.1 percent for the same period.
Other standouts include Minnesota, which had an unemployment rate of 5.3 percent, and Kansas, with a 5.5 percent rate. States still struggling in this recovering region include Illinois, which reported a 9.3 percent unemployment rate in April 2013, and Indiana, which had a rate of 8.5 percent, according to the BLS.
STRONG CONFIDENCE
Midwesterners are exhibiting strong consumer confidence—their unemployment rate is still among the lowest in the country. The region has not, however moved much toward more recovery.
Overall, the Midwest’s Consumer Confidence Index (CCI), as reported by The Conference Board, is extremely positive compared to that of the overall U.S., which reported in at 76.2 (1985=100) in May.
In the Midwest’s West North Central region, the CCI tipped up to 92.9 in May 2013, up from to 81.7 in May 2012. The Expectations Index here was also relatively strong in May at 84.7, according to The Conference Board’s Consumer Confidence Survey.
In the Midwest’s East North Central region, where unemployment rates are very low, consumer confidence was not quite as strong. In this area, the CCI was 81.3 in May 2013, which was somewhat lower than the Midwest’s West North Central region but significantly higher that the CCI of 58.6 reported in the East North Central region in May 2012.
| OPTICAL FILE |
FRAME FOCUS MATERIALS. More than half of the frames sold by our respondents in the Midwest are plastic (59 percent), up a whopping 17 percent year over year. The traditional stalwart, metal, is holding on to 29 percent of frame sales, with the 10 percent drop partially attributable to a 9 percent stake in the new metal/plastic combination frame category. PURCHASE PATTERNS. Holding steady in its buying patterns, the region’s consumers at respondents’ locations were 88 percent likely to select new frames, and a nominal one percent fewer refilled Rx’s in existing frames (13 percent). SECOND PAIRS. This year, the Midwest market leads the nation in clip sales again, at 4 percent of second-pair sales. Sunglasses lead the category, and the Midwest is neck and neck with the West at the top spot at 70 percent of second-pair sales. Though casual and computer frame second-pair sales lag behind other regions, casual frames sales grew to 5 percent. PRICING. Midwest leads in keeping the same prices at 59 percent. |
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| LENS MARKET |
FREE-FORM. Midwest ECPs are reporting the lowest free-form market share this year, at 33 percent of total lens sales. PALS. The Midwest is losing the most ground in progressive lens sales this year than any other U.S. region, putting just 66 percent of its presbyopes in PALs, down from 75 percent in 2012. MATERIALS AND EXTRAS. This year, 55 percent of Midwest respondents noted poly as their most-used “premium” material (up from 47 percent), leading the U.S.A. The region also leads the nation in popularity of 1.74, with 6 percent of respondents noting the material as their most-used. This was the only region to experience a dip in Trivex sales, losing 8 percentage points so far from last year. This is the No. 2 region for AR sales, coming in at 81 percent. Though polarized dipped here by half from 2012, the Midwest leads the nation in the category at 4 percent. Photochromic sales remained stable. |
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| EDGING STATS |
In-house edging saw a slow down in the Midwest so far this year, with only 35 percent of respondents operating a finishing lab. That’s fewer than the 42 percent who reported finishing last year. But, those who do say they are processing either the same number of jobs or more than a year ago. 13%…more than last year 0%…less than last year 23%…same as last year |
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| SPECIALTY EYEWEAR |
Computer eyewear sales grew by 15 percent here, while sports eyewear took an 8 percent hit in sales. |
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| DID YOU KNOW? |
Lincoln, NE…Happiest city in the U.S. (Livescience.com) Belle Fourche, SD…Geographic center of North America (USA Today) Detroit…Country’s most “miserable” city (NBC News) Iowa City, IA…Best place “to start over” in life (TheStreet.com) |
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INCREASED COSTS
The Midwest’s consumers also got a break on 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 only jumped by 1.2 percent in April 2013 over April 2012, according to the BLS. This was still more than the overall national CPI decrease of 0.4 percent from 2012 to 2013.
RETAIL REAL ESTATE
The Midwest’s commercial real estate markets haven’t recovered much over the year.
“The Midwest is still really struggling from its decline as the heart of U.S. manufacturing, so it just doesn’t have the dynamic growth prospects that other regions such as the Northeast and West have,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information.
VACANCY RATES
Like this region’s stagnant jobless rate, the vacancy rates for commercial real estate in the Midwest remain relatively unchanged from 2012. In fact, in the first quarter of 2013, vacancy rates rang in at 12.4 percent, which was only a slight decline from the 12.9 percent vacancy rate here in the first quarter of 2012, according to Reis, Inc. The 2013 rate is also higher than the overall U.S. vacancy rate of 0.9 percent in the first quarter.
RENTS
While positive change is on many economic fronts in the Midwest, it is being delivered at a snail’s pace. The story is no different when it comes to retail real estate asking rents, which came in at $15.96 for the first quarter of 2013, according to Reis, Inc. This number is up from the asking rent of $15.91 in the first quarter of 2012.
METRO MARKETS
While change is slow to come in this region, there are certainly some beacons of hope.
“Chicago is one of better markets in the Midwest, but it’s not doing spectacularly well,” says Severino. “If you look at cities like St. Louis with a 12.5 percent vacancy rate and Detroit with about 11.6 percent, then on a relative basis Chicago looks good; but, if you benchmark it against the rest of the country, then not so much. This is emblematic of what’s going on in the Midwest—all the economies are struggling with industrial decay.”
CITIES TO WATCH
The Chicago retail real estate market finished the first quarter of 2013 with a relatively healthy vacancy rate of 11 percent, a number that was down 80 points from the first quarter of 2012, according to Reis, Inc. Rental rates came in at $19.11, a 0.2 percent change from 2012.
Things looked a bit brighter in Omaha, where the vacancy rate dropped slightly to 8.9 percent in the first quarter. Rents here reported in at $13.72 per square foot in the same time period, an increase of almost one percent since 2012.
FASHION TRENDS
In fashion, the Midwest is adopting new trends faster than ever. “I don’t think the differences between the different regions of the country adopting trends is as big as it used to be,” says Roseanne Morrison, fashion director at The Doneger Group, a New York City-based trend and color forecasting service.
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