Employment growth slowed in the Northwest region during the fourth quarter and the annual growth rate slipped to 2.7 percent. Lumber and agricultural exports in Northwest have been hurt by the Asian economic crisis. The Asian situation has also put a damper on aerospace and high-technology manufacturing employment, particularly in Washington. The most dramatic slowdown occurred in Oregon, as cutbacks in manufacturing employment pulled annual employment growth between the fourth quarter of 1997 and the fourth quarter of 1998 down to 2.2 percent. Washington remained the fastest growing State in the region, but its growth rate dipped to 3 percent. Alaska's gain was near 3 percent and growth in Idaho began to recover and ended the year at 2 percent.

The regional unemployment rate was 5.1 percent for the fourth quarter of 1998, up from 4.8 percent in the fourth quarter of 1997. Oregon and Washington experienced increases in unemployment rates, averaging 4.8 and 5.7 percent, respectively, during the fourth quarter, while labor markets in Idaho and Alaska tightened. Idaho had the lowest rate in the region: 4.3 percent. Alaska recorded the most notable change in unemployment, falling from 7.4 percent to 5.9 percent, the lowest rate in the past 3 years.

In 1998 building permits for single-family homes in the Northwest increased by 4 percent to 58,877 units, while multifamily housing activity rose by 3 percent to 26,976 units. In Washington multifamily permit activity increased 24 percent to 16,360 units. However, in Oregon permits dropped 22 percent, reflecting cutbacks in response to the large pipeline of activity that has developed during the past 3 years. In Idaho multifamily activity declined 20 percent.

Buoyed by low interest rates, home sales throughout the region remained very strong through the fourth quarter and sales for the year were above 1997 levels in all States. While existing home sales where up slightly less than 2 percent in both Idaho and Oregon from very strong 1997 volumes, Washington recorded a big 12-percent gain to 131,000 homes. Price appreciation was in the 5-percent range everywhere except Idaho. In the Portland area, local sources report home sales for the year were up approximately 9 percent over 1997. The median sales price for the year was $158,100. Demand for condominiums was also strong, with a median selling price of $110,000. Idaho experienced record sales throughout the State, but prices increased only modestly due to the high volume of new construction during the past year.

The Puget Sound area rental housing markets are still among the tightest in the region. The slight increases in vacancy rates in the Seattle metropolitan area during the past 12 months are temporary and reflect new units entering the market. The Tacoma and Bremerton area markets are experiencing declining rental vacancy rates as renters look for more affordable and available units outside the Seattle area. Eastern Washington markets in Spokane and the Tri-Cities area remained soft as a result of high volumes of new construction and slower employment growth. Both areas are experiencing rental vacancy rates of near 10 percent. In the Portland and Boise areas, recent apartment construction has eased market conditions and both areas are recording overall year-end rental vacancy rates of 6.5 percent. Rental market conditions tightened in Anchorage during the fourth quarter, with overall vacancies in the 4.5- to 5.5-percent range. Rents were on the increase, and several new apartment developments were being planned.

Spotlight on Seattle-Everett-Bellevue, Washington

The Seattle economy remains strong, but employment growth has begun to slow from the very rapid pace of the past 3 years. Wage and salary employment rose by 3.1 percent to 1,376,400 in the 12 months ending in November 1998, compared with a 5.8-percent gain for the period ending November 1997. The gains are the result of record commercial airplane production at Boeing and a frenzied hiring pace in high technology, software, construction, retail trade, and services. The unemployment rate was 3.1 percent during the fourth quarter of 1998 compared with 3 percent during the same period a year earlier. Labor shortages continued to be reported for a variety of occupations, especially in the non-manufacturing sector.

After being plagued by production troubles and poor financial performance, Boeing announced job cuts in December 1998, which will change the employment picture for Seattle in 1999 and beyond. A total of 30,000 jobs at Boeing will be eliminated during the next 24 months, with Snohomish County (Everett) and south King County (Seattle) being hardest hit. Local analysts are not forecasting a recession, but they expect a significantly lower rate of employment growth in 1999.

According to the State, the population in the metropolitan area grew by an estimated 36,500 persons (1.7 percent) between April 1, 1997, and April 1, 1998, bringing the total to 2.2 million. Snohomish County experienced the highest rate of growth (3.1 percent) for the third straight year.

Single-family building permit activity in 1998 totaled 10,276 units, up 1 percent compared with 1997. Multifamily building permit activity totaled 11,685 units, a 31-percent increase, the highest volume since 1990. The increase reflects unmet demand and an increasing number of builders taking advantage of the very hot rental and condominium markets.

Strong employment growth, the shortage of buildable land, and low interest rates kept upward pressure on housing demand and prices in 1998. Homes sold in record short times in 1998. The average time on the market in 1998, 36 days in King County and 47 days in Snohomish County, was 25 percent shorter than in 1997. The Northwest Multiple Listing Service reported 41,000 sales of new and existing homes in 1998, up 5 percent compared with 1997. According to the NATIONAL ASSOCIATION OF REALTORS^®, the median sales price for resales in the Seattle metropolitan area as of the third quarter was $200,600.

Housing affordability in the Seattle metropolitan area remains a high-profile issue. In December the city of Seattle implemented new land-use rules to increase the production of affordable housing. Among the rule changes signed into law was a 10-year property tax break for developers who build apartments in any 1 of 11 targeted neighborhoods. Developers will also be allowed to experiment by building higher density cottages and starter homes in traditionally low-density, single-family zones.

New apartment developments in 1998 have provided some temporary relief to the extremely tight rental market in the Seattle metropolitan area. According to the September 1998 Dupre+Scott Apartment Vacancy Report, the rental vacancy rate was 3.7 percent compared with 2.6 percent a year ago. Apartment rents in King County rose 9.2 percent on an annual basis to $739. In Snohomish County, the average was $686, up 6.3 percent. Most of the new rental units in the metropolitan area have targeted high-income households and are located in east King County (Bellevue, Issaquah, and Redmond) and southeast King County (Renton). Vacancies rose in each of these areas as the absorption of new luxury units in the $850 to $1,400 range slowed significantly. The slowdown in high-end rentals is due in part to increased homeownership, particularly in condominiums for which monthly payments are equal to or less than high-end apartment rents.