Employment in the Pacific region increased by 495,900 jobs, or 2.9 percent, during the 12 months ending in August. Half of California's estimated 378,000 new jobs in the period were located in six counties in Southern California. The State's unemployment rate of 5 percent in August is one of the lowest since 1969. Arizona produced 70,100 new jobs, a 3.4-percent gain, with 46,200 of those jobs originating in Phoenix. The 3.2-percent gain in the 12-month period ending in August was well below the 5.6-percent job growth rate for 1998 because of a cooling of the high-technology manufacturing export sector. The opening of the 2,914-room Paris Hotel Casino in Las Vegas this quarter helped make Nevada the fastest growing State in the region in the 12 months ending in August, with 47,300 new jobs, an increase of 5.1 percent. Employment growth in the neighbor islands more than offset a 1,300-job loss in Honolulu, resulting in a net gain of 300 jobs in Hawaii in the 12 months ending in August 1999.

Single-family building permit activity in the Pacific region during the first 9 months of the year totaled 141,177 homes, an 8.4-percent increase over the year earlier. The number of permits issued was up in every State, with Arizona at 41,757 and California at 70,605 recording the largest totals. Reflecting the increasing economic strength in Southern California, builders in the Los Angeles-Riverside-Orange County area were issued permits for more than 29,600 homes in the first 9 months of 1999, up 17 percent from the same period last year.

Existing home sales in 1999 have shown strong performance in the Pacific region. According to the California Association of REALTORS^®, sales through August were more than 7 percent ahead of the volume in the comparable period last year. Resales through August in the Phoenix and Las Vegas areas were also up 9 and 15 percent respectively over the record pace for the same period last year. The Honolulu Board of REALTORS^® reported existing home sales to be up 23.5 percent in the first 8 months of the year.

Regionwide, multifamily building permit activity through September totaled more than 40,900 units, virtually unchanged from a year earlier. In Califor-nia, permits were issued for more than 24,700 units, a 15-percent increase. The volume of activity in the San Francisco Bay Area through September was down 6 percent compared with a similar 1998 volume for the same period. Bay rental markets have further tightened in the past year, with rental vacancy rates in the 2.5- to 3.5-percent range.

Multifamily activity in Southern California through September totaled more than 8,100 units, a 21-percent increase over the first 9 months of 1998. The overall rental vacancy rate in Los Angeles County has fallen to 7 percent; however, some coastal communities have rates of 5 percent or less. The vacancy rate has dropped to near 8 percent in the Riverside-San Bernardino area. San Diego County has a rental vacancy rate of about 5 percent. The tightest rental markets in Southern California are in Ventura County and the southern part of Santa Barbara County, with vacancy rates of 4 percent or less.

In Arizona, multifamily permits through September fell to 8,680 units, down 10 percent compared with the year-earlier period. Phoenix-area multifamily production, at 7,153 units, was off 16 percent in the first 9 months of the year after 5 years of strong development activity averaging 9,600 units annually. The decline reflects in part more competitive conditions in the rental market and the increasing costs of production and scarcity of good sites in a number of submarkets. Some cities are restricting densities. Rental vacancies continue to increase in most submarkets, with vacancy rates averaging approximately 7 percent in large properties of 100 units or more. In Las Vegas, multifamily activity was down 34 percent to 5,227 units. The drop in production during the past 12 months and the wave of new casino hotels this year have kept the apartment vacancy rate stable at about 6.5 percent.

Spotlight on Oakland, California

The Oakland metropolitan area, made up of Alameda and Contra Costa Counties, has seen its population grow by 1.3 percent per year since 1990 to 2,349,700 persons. In the 12 months ending in August 1999, nonagricultural employment grew by more than 32,000 jobs, an increase of 3.3 percent compared with the period a year earlier, making the Oakland area the fastest growing area in the San Francisco Bay region. All major employment sectors recorded gains, while the unemployment rate dropped to 3.3 percent.

Reinforcing its historic role as one of the Bay Area's main transportation and distribution hubs, the Port of Oakland announced that a new terminal will be built by its future largest tenant, the Hanjin Shipping Company. A recent study by the Milken Institute ranked the Oakland area 14th in a study of 315 metropolitan areas in the creation of high-technology dollars and jobs. The University of California, Berkeley, one of the country's leading research universities, is a major factor. The University recently announced a $500 million health sciences initiative to link its research strengths in biotechnology, engineering, and physical sciences. Another major development is the Bayer Corporation's planned $340 million conversion of a vacant factory to a biotechnology research and production facility in West Berkeley.

The increasingly higher prices for housing in both the San Francisco and San Jose metropolitan areas have pushed buyers to look at the Oakland area as a more affordable alternative. The economic growth in Silicon Valley is one of the major factors of the increase in housing demand in the southern half of the Oakland area, as workers seek affordable housing in communities such as Union City, Livermore, and Fremont. Existing home sales in the first 6 months of 1999 compared with the first half of 1998 were up in Alameda and Contra Costa Counties by 14 percent and 8 percent, respectively. Sales in the Oakland metropolitan area during the period totaled more than 20,100 homes. The median sales prices for the period in Alameda and Contra Costa Counties were $252,000 and $219,000, respectively, a 5.4-percent increase compared with the first half of 1998.

Single-family building permit activity in the first 9 months of 1999 totaled 5,466 homes, a 4.3-percent increase. The fastest growing areas are in eastern Contra Costa County and southern and eastern Alameda County, where I-580 and I-680 have made large tracts of land accessible. However, the resulting development activity has stirred opposition. Spurred by a 12,500-home development proposal in Livermore and other recent growth, voters in Livermore, Pleasanton, and San Ramon will consider ballot measures in November that would place various restrictions on approval of housing development. The increased demand for housing has also supported in-fill development in Oakland, such as the mixed-use commercial, retail, and residential village around the Fruitvale BART station, a proposed $50 million highrise apartment complex near Lake Merritt, and a proposed development of 200 single-family homes on former manufacturing and railway land.

The Oakland area rental housing market has become very tight because of the strong regional economy. As of June 1999, the apartment vacancy rate was 2.6 percent in Alameda County and 2.4 percent in Contra Costa County according to a survey of larger properties by RealFacts. According to RealFacts, average apartment rents have steadily increased in both counties during the past few years. The average rent for a two-bedroom apartment in Alameda County was $1,068; the average was $980 in Contra Costa. The rental market is expected to continue to tighten because development is not keeping up with the growing demand. During the first 9 months of 1999, permits were issued for only 1,865 multifamily units, almost 20 percent below the volume for the same period in 1998.