The New York/New Jersey regional economy slowly continued to improve. Employment in New York State increased by 91,000 jobs (1.2 percent) during the 12-month period ending in August 1997. New York State's unemployment rate, however, remained at a relatively high rate of 6.4 percent in August 1997, up from 6.1 percent in August 1996.

New York State's relatively high unemployment rate is largely attributed to New York City. In August 1997 the city's unemployment rate was 9.5 percent, up from 8.8 percent the previous year. The increase occurred despite the fact that the city gained 45,100 jobs (a 1.3-percent increase) in the 12-month period ending in August 1997. According to a recent report by the New York City Comptroller, the increased unemployment in the face of job growth is attributed to an increase in the labor force and suburbanites filling jobs. Many of the new jobs, most notably on Wall Street and in high-technology companies, require advanced skills or academic qualifications.

Employment in New Jersey increased by 46,000 jobs (1.3 percent) during the 12 months ending in August 1997. New Jersey's unemployment rate was 5.2 percent in August 1997, a significant decline from 6.1 percent the previous year. Between 1989 and 1992, the State lost 7.1 percent of its total employment. As of August 1997, New Jersey had regained almost all the lost jobs. A factor in New Jersey's economic recovery has been its highly skilled work force, which is able to take advantage of new, high-wage jobs in information technology and computer software.

The Rutgers Economic Advisory Service estimated that New Jersey will gain 65,000 nonagricultural jobs in 1997, an increase of 1.8 percent. By 1999 employment is expected to grow by 5.2 percent in central New Jersey and 5.3 percent in Southern New Jersey, but only by 2.2 percent in Northern New Jersey. Jersey City, which is benefitting from the Wall Street boom, is the sole exception to the expected trend of slower employment growth in Northern New Jersey.

The sales housing market has shown strong performance in New York City. Manhattan's cooperative and condominium markets have been very active in 1997. According to a recent report from the Halstead Property Company, the average sales price in the Manhattan market rose five straight quarters through the second quarter of 1997. Sales below 96th Street as of the second quarter of 1997 were up about 20 percent from 1 year earlier, and the length of time properties remained on the market declined 35 percent. A recent study by the Real Estate Board of New York found that prices for Manhattan studio and one-bedroom units as of the second quarter of 1997 had increased by 10 percent compared with the same period 12 months earlier. Sales prices have generally increased elsewhere in New York City but less steeply than in Manhattan.

In Queens the median price of a single-family home was $165,000 in the second quarter of 1997, up 3 percent from 1 year ago but still below the peak of $168,500 in 1989.

The Manhattan rental market remains tight. Slightly more than 1,000 market-rate rentals were completed in 1996, and in the first 9 months of 1997 another 2,000 units entered the market. Absorption has been fairly rapid for all new apartments. It is estimated that approximately 5,000 units of market-rate rentals will be completed in 1998 and another 3,000 units will follow in 1999. Approximately one-third of these units will be located in downtown Manhattan -- predominately in the Soho, Tribeca, and Wall Street areas.

Manhattan's commercial real estate market is booming. A recent survey indicated that the average rent for Class A office buildings in Manhattan is $37.50 per square foot annually, the highest level in the 1990s. Significant price increases are partly attributed to participation in the bidding for office properties by REIT's and investment bankers on Wall Street. There is still very little construction of new office buildings in Manhattan, although Bear Stearns has announced an intention to build a 1.1-million-square-foot office tower. Hotel rates as of August 1997 were up 10 percent compared with August 1996, and occupancy had increased to 81 percent.

Ground breaking recently took place on the first large-scale commercial development in East Harlem in 20 years. The $15 million project, to be completed by the end of 1998, will include a suburban-style Pathmark supermarket and pharmacy, a Chase Bank branch, space for several smaller retail and commercial tenants, and a rooftop parking garage for 125 cars. Pathmark and the other tenants will receive tax breaks by hiring workers from the Upper Manhattan Empowerment Zone that was created to spur Harlem development.

The National Association of REALTORS^® reported that the annual rate of existing homes sold statewide as of the third quarter of 1997 increased by 4.4 percent to 166,800 compared with the third quarter of 1996. Sales in New Jersey were up 6.8 percent over the same period in 1996 to 159,200.

Single-family building permit activity in New York State for the first 9 months of 1997 remained fairly strong (15,062 units) and was off by only 4 percent from the 1996 volume for the same period. Multifamily housing activity in New York State in the first 9 months of 1997 totalled 10,050 units, a 16-percent decline from the very strong level during the same period in 1996. However, activity in 1997 is on pace to make it the second best year since 1990. The New York City housing market continued to show strength; multifamily activity in the first 9 months (6,585 units) was up 9 percent compared with the same period last year.

In New Jersey single-family building permit activity totalled 17,042 units in the first 9 months of 1997, a 16-percent increase over the same period in 1996. Multifamily permit activity (2,750 units) was up 21 percent.

Spotlight on Rochester, New York

The Rochester metropolitan area, with 1.09 million residents in 1996, experienced a moderate 2.4-percent population growth between 1990 and 1996, substantially above the 1.1-percent growth rate for the State. Larger growth rates have occurred in the outlying counties of the metropolitan area. Wayne and Ontario counties, which comprise only 18 percent of the total population of the area, have accounted for 38 percent of the growth since 1990. Rochester, the most stable labor market of the Upstate New York metropolitan areas, continued to post employment gains. The area has benefitted from close proximity to the Canadian gateway, which provides direct access into markets and industry in the vicinity of Toronto. Its strategic location relative to Canadian trade opportunities, the extensive pool of skilled workers, and a well-developed transportation system have contributed to economic expansion.

From August 1996 to August 1997, nonagricultural employment increased by approximately 4,900 jobs (or 0.9 percent) to 528,400 jobs. Job expansion was mainly in the trade and service sectors, particularly retail trade and business services. Small gains were also reported for the finance, insurance, real estate, and government sectors.

Manufacturing remains a significant component of the area's economy, comprising about 24 percent of nonagricultural employment. Major manufacturing employers in the area include the Bausch & Lomb, Eastman Kodak, and Xerox corporations. There were small reductions in the number of manufacturing jobs from August 1996 to August 1997. Industry analysts report that future employment reductions are expected for Kodak as it continues to face more competition, flatter sales, and declining profits.

Residential building permits in the Rochester area totalled 2,888 units in 1995 and then declined to 2,115 units in 1996. In the first 9 months of 1997, permits were issued for 1,594 units. Single-family homes account for almost 85 percent of all post-1990 housing activity.

Multifamily housing construction dropped from 527 units in 1995 to 425 units in 1996. During the first 9 months of 1997, 404 multifamily units were permitted. Development has been concentrated in the suburban portion of Monroe County, which surrounds the central city of Rochester. Almost no new residential construction has occurred within the central city of Rochester since 1990.

HUD mortgage insurance commitments have been almost equally balanced between refinancing of older, existing rental properties and construction of market-rate properties that have rents more than 25 percent above the older rental stock. Contract rents for the newer two-bedroom apartment units range from $800 to $950 per month.

The rental housing market is balanced, with rent increases estimated to be between 2 and 4 percent annually. Vacancy levels in the high-rent multifamily developments tend to be below the average for all rental units. Older rental properties have the highest rental vacancy rates.

Information published by the National Association of REALTORS^® showed a median sales price as of the third quarter of 1997 of $88,100, up less than 1 percent from the same period in 1996. Similar to other urban market areas in Upstate New York, Rochester could be characterized as a buyer's market with an increasing inventory of available housing.