The New York/New Jersey regional economy continues to advance at a moderate pace. Employment in New York State increased by 134,000 jobs (1.6 percent) and in New Jersey by 63,000 jobs (also 1.6 percent) between November l997 and November 1998. New York State's unemployment rate was 5.5 percent in November 1998, down sharply from 6.2 percent in November 1997. New Jersey's unemployment rate declined from 4.9 percent to 4.5 percent. A recent report by the Federal Reserve Bank of New York indicated that employment growth in New York State and New Jersey will proceed at a slightly slower pace in 1999 than in 1998. The major thrust of the growth will come from New York City and the other downstate metropolitan areas. New York City employment gains between November 1997 and November 1998 totaled 92,500 jobs, a 2.6-percent increase. The city's unemployment rate was 8 percent in November 1998, down from 8.7 percent a year earlier.

New York City's commercial real estate market continues to be strong despite the impact of the global financial crisis. During 1998 vacancies remained low and many commercial real estate lenders were optimistic about 1999 because the anticipated big layoffs in the financial services industry have not materialized. As a result, sales activity is expected to pick up in 1999. Rental conditions in both the Midtown and Downtown office markets remain tight, with rents rising. The vacancy rate in Midtown Manhattan in October 1998 was 6.3 percent, down from 8.3 percent a year earlier. In the Downtown Manhattan market, the vacancy rate of 5.9 percent in October 1998 was down considerably from 9.6 percent a year earlier. The Downtown Manhattan office market has benefited from the overflow of the Midtown market and from attracting many small startup companies. There has been little new office building construction in Manhattan in the 1990s, unlike in the 1980s. Morgan Stanley has recently made a commitment to build a 33-story office tower on Seventh Avenue between 49th and 50th Streets.

The market for office space is steadily improving on Long Island. According to Cushman & Wakefield, the overall vacancy rate for prime office space was 10 percent at the end of the third quarter of 1998, down from 13 percent a year earlier. Rents during the same period rose 6 percent to $24.80 per square foot. Speculative construction of more than 1 million square feet of office space in five projects is expected to begin by mid-1999.

In Northern New Jersey, construction is to start in early 1999 on a $150 million project to be developed by Hartz Mountain Industries on a 55-acre site near Newark Airport. The development will include a 50,000-square-foot conference center, a 550-room deluxe hotel, and a 250-room limited service hotel.

Single-family building permit activity in New York State in 1998 totaled 23,191 units, a 17- percent increase over 1997. Activity was up throughout Upstate New York, increasing 33 percent in the Syracuse area and 28 percent in the Albany area. Multifamily housing permit activity in New York State totaled 15,265 units in 1998, up 16 percent from 1997. The New York City metropolitan area continued to show strong performance, with 10,456 multifamily units for 1998, an increase of 22 percent above a very active 1997. New Jersey single-family building permit activity totaled 24,958 homes during 1998, up 9 percent compared with 1997 volume. Statewide, multifamily permits were issued for 5,400 units, a 22-percent gain over 1997. One-quarter of the total multifamily activity in the State was in the Jersey City metropolitan area.

The New York State Association of REALTORS^® reported that the annual rate of existing home sales as of the third quarter was up 9 percent, to 186,100 homes. The New Jersey Association of REALTORS^® also reported that the annual rate of home sales was up 13 percent, to 178,400. The market for residential sales in Manhattan in 1998 was very good, with sales up 16 percent from 1997 according to a survey by Halstead Property Company.

The adoption in 1998 of a tax-exempt bond initiative by the New York State Division of Housing and Community Renewal, through its Housing Trust Fund, has set in motion the creation of 11 affordable housing projects with a total of 1,205 apartments. Five of these projects will be in New York City. The total development cost of this initiative is $137 million. The tax-credit allocations granted to this program are expected to raise $42.6 million in equity capital. New York State has committed $70.4 million in bond financing and the Housing Trust is contributing very low-interest loans totaling $30.2 million, an average of $25,000 per housing unit.

Spotlight on Elmira-Corning, New York

The Elmira-Corning area, consisting of Chemung and Steuben Counties, had a population of approximately 192,000 persons in mid-1997, a slight decline of 1 percent since the 1990 census. From October 1997 to October 1998, employment increased by 1,300 jobs, or 1.6 percent, an improvement over the previous 3 years when gains were about 1 percent annually. The unemployment rate for the area was 4.1 percent as of October 1998. Labor shortages are beginning to occur for certain skilled positions, and Corning Incorporated, the largest employer, is recruiting employees from outside the labor market area.

The economy of the area remains highly dependent on manufacturing, especially Corning Incorporated, which has more than 6,000 employees. Corning has made a major investment in research and development of fiber optics, which has applications in the cable television, computer networking, and telecommunications industries. Over the next few years, the company expects to hire 1,500 new employees, primarily scientists, engineers, and high-wage manufacturing employees.

During the 1990s, residential construction in the area has averaged approximately 310 units a year, with single-family homes accounting for 85 percent of the total. According to the New York State Association of REALTORS^®, 357 existing homes were sold in the area during the third quarter of 1998, about equal to the 1997 volume for the same period. However, the median sales price of an existing home increased by almost 10 percent to $71,700. The expansion of Corning will have a major positive impact on the local housing market. Numerous housing proposals have been presented to local planning boards, including several in the vicinity of the firm's research and development facility in Erwin, New York.

The rental housing inventory in the Elmira-Corning area consists largely of large older homes converted to apartment units and small apartment projects, typically fewer than 50 units. The rental stock in Elmira is the oldest in the area and has an overall vacancy rate of 10 percent. Market conditions in suburban Chemung and Steuben Counties and in the city of Corning are much tighter, with vacancy rates estimated at 5 percent or lower. In anticipation of the expansion plans at the Corning plant, several large apartment developments are in planning. The largest are the 200-unit Hickory Grove Apartments and the 144-unit Woods Edge development.