The Northwest region's economy has continued to expand at an impressive pace. Nonagricultural employment in the region grew by 135,400 (2.8 percent) between the third quarter of 1997 and the third quarter of 1998, with Washington generating nearly 60 percent of the increase. Employment was up 3.2 percent in Washington, 2.9 percent in Alaska, 2.5 percent in Oregon, and 1.8 percent in Idaho.

Labor markets across the region remained tight; the regional unemployment rate was 5.1 percent during the third quarter, down slightly from 5.2 percent a year ago. Idaho and Washington had the lowest unemployment rates: 4.6 and 4.8 percent, respectively. Alaska posted a notable decline from 1 year ago, from 7.3 percent to 6 percent. The three major metropolitan areas had the lowest rates: 3.1 percent in Seattle, 3.4 percent in Boise, and 4.3 percent in Portland. Rapidly rising housing costs in the Seattle area continued to dampen the local labor market.

In Washington, the services industry led job gains, with a strong boost from seasonal hiring in construction and tourism. The volume of construction projects under way in Seattle is so great that employment in this industry will remain at record levels well into 1999. The outlook for the Seattle economy remains relatively optimistic despite the recent announcement by Boeing to cut another 2,000 jobs in the Puget Sound region and the Southeast Asian financial crisis, which has already affected the State's computer parts industry and the export of wheat, apples, and forest products. Boeing is expected to maintain very high airplane production levels through 1999. The economy will continue to benefit from the multiplier effects of Boeing jobs and growing services and trade industries.

Building permits for new single-family homes in the Northwest increased by 5 percent through September to 46,374 units, while multifamily activity of 19,052 units changed slightly. The bulk of residential construction activity in the region continued to be in Washington, which recorded more than half of all the units permitted. Single-family permits in the Puget Sound area totaled more than 13,600 in the first 9 months of this year, slightly ahead of a strong 1997. Multifamily permit activity in the Puget Sound area was up 28 percent to 8,857 units. Idaho had a 17-percent increase in single-family permits for the first 9 months of 1998, compared with the same period in 1997.

The pace of home sales was brisk throughout the Northwest in the third quarter, as low interest rates spurred demand. Idaho sales are in line with last year's pace of approximately 1,000 per month, and prices have increased in the 3- to 5-percent range. In Boise, sales were up nearly 18 percent during the third quarter of 1998, compared with the same period a year ago. The median sales price was $156,500, a 5-percent in- crease. Total sales in both Portland and Seattle rose 10 percent. The median sales price in Seattle ($205,300) was 11 percent higher than it was during the same quarter a year ago. Spokane sales were up 8 percent, with a reported median sales price of $107,500.

Condominiums have become attractive to first-time homebuyers in the Seattle area as an affordable alternative to the high prices of single-family homes. Sales through the third quarter (4,489 units) were up 6 percent compared with the same period a year ago. The median sales price for the metropolitan area was $132,600, up 5.3 percent compared with 1997. Condominium sales in downtown Seattle were exceptionally strong. A vibrant residential market has emerged in the downtown area, attracted by the commercial construction projects nearing completion. New downtown condominium developments are preselling units in record time. A 223-unit project presold half of its units in only 7 weeks; the majority of these units were in the $250,000 to $350,000 price range. Another 139-unit project with units starting at $80,000 was completely presold before completion.

Rental housing market conditions in Boise have tightened this year, driving the vacancy rate down to 4.5 percent as of August 1998, compared with 6.5 percent a year ago. The 500 multifamily units currently under construction are expected to be quickly absorbed as they enter the market. In Oregon, rental vacancy rates in the metro-politan areas have been creeping up to the 6- to 7-percent range during the year.

The tight rental housing market conditions seen in the Seattle area have begun to appear in other Puget Sound markets. The rental vacancy rates as of the third quarter were 5.4 percent in Tacoma and 5.1 percent in Olympia. The Bremerton rental vacancy rate has fallen from 9.6 percent to 7.2 percent in the past year. Seattle's rental vacancy rate was 3.1 percent, compared with 2.6 percent a year ago.

Spotlight on Portland-Vancouver, Oregon-Washington

Employment growth in the Portland-Vancouver area during the 12 months ending in August 1998 increased by 2.6 percent, down from the annual average for the decade of 3.1 percent. Wage and salary employment rose by 24,850 jobholders to a total of 944,100. In a reversal of last year's high-technology employment growth forecast of 7,000 jobs, firms in this sector have announced or implemented layoffs of 5,100 workers. The unemployment rate rose from 4.1 percent to 4.2 percent between August 1997 and August 1998.

Single-family building permit activity through September totaled 8,778 units, down only 4 percent from the same period in 1997, which was the best year so far of the 1990s. The reduction reflects the recent accumulation of unsold new homes, especially on Portland's west side. Sales of new and existing single-family houses totaled 20,879 through August 1998, up 9.3 percent from the same period last year. The median sales price was $152,875, up 4 percent from the same period in 1997. Price appreciation during the first 8 months of 1998 was approximately half the 8-percent rate for the same period last year.

Continuing strong demand and lower mortgage rates have created the opportunity for buyers to move up. Home sales increased most dramatically, by 50 percent, in the $140,000 to $250,000 price range. Condominium sales for the first 8 months of 1998 increased by 25 percent over the same period in 1997, with sales totaling 616 units compared with 493 units a year ago. The median price of condominiums increased 7 percent to $109,950.

Rental housing market conditions have been balanced, with an areawide vacancy rate of about 6 percent. Multifamily building permits totaled 4,709 units for the Portland-Vancouver area during the first 9 months of the year, a drop of 11 percent from the comparable period in 1997. Multifamily development has been especially strong in the Hillsboro-Aloha-West Beaverton submarket, which has been the area's leader in job growth during the past several years.

Strong activity in the Federal Low Income Housing Tax Credit program has boosted multifamily development. The Oregon Housing and Community Services Department estimates that approximately 1,000 tax-credit units are currently in development in the Portland area, the bulk of which will be located near Portland's downtown core.

Rents have been stable during the past year for one- and two-bedroom apartments, but have increased by nearly 5 percent for three-bedroom apartments. Coinciding with the pattern of multifamily development, absorption performance has been mixed throughout the metropolitan area. Aggressive incentive packages are being offered in the most competitive submarkets.