The New England economy, led by Massachusetts and Connecticut, is recording modest job gains. Nonagricultural wage and salary employment as of August 1998 had increased by 1.8 percent, or 138,400 jobs, from August of the previous year. Of the increase, 123,000 jobs were in service- producing industries. Labor markets remain very tight. The unemployment rate for the region was 3.3 percent in August 1998, down from 4.4 percent in August 1997. New Hampshire and Vermont had the lowest unemployment rates: 2.1 percent and 2.9 percent, respectively.

Single-family home building permit activity in the New England region from January through September totaled 30,307 homes, a 12-percent increase compared with the same period in 1997. Increases ranged from 7 percent in Massachusetts, with 12,181 homes, to 18 percent in New Hampshire, with 3,828 homes.

The number of multifamily housing units permitted during the first 9 months of 1998, 5,898 units, was up 20 percent compared with the same period in 1997. Connecticut, Maine, Massachusetts, and Vermont reported substantial increases in activity. Much of the apartment construction is in high-rent developments in suburban areas of Boston; in the Danbury, Hartford, and New Haven, Connecticut, areas; and in the Portland, Maine, area. These areas have strong rental markets that are being sustained by recent job growth.

The decline in mortgage interest rates contributed to an all-time high annual rate of existing home sales in New England. The annual rate of sales through the second quarter increased by more than 16 percent to 221,600 sales. Sales prices in the region are up almost 6 percent as of the second quarter of 1998, compared with the same period in 1997.

Rental markets tightened in the third quarter, as evidenced by declining vacancy rates and increasing rents. Most of the new inventory is at or near the top of the market, and units are rented-up quickly. According to the U.S. Department of Labor, Boston had a rent increase of 4.3 percent from June 1997 to June 1998.

Although Boston and Stamford get most of the headlines in the commercial real estate market, Hartford has improved significantly during the past 2 years. The vacancy rate for Class A office space in the Hartford area has declined to 11 percent from more than 20 percent in 1994. In the first 9 months of 1998, the vacancy rate for Class A space in the central business district has declined from just under 15 percent to just under 10 percent. Since bottoming out in 1996, office rents have increased more than 15 percent as of the third quarter of 1998.

Spotlight on Boston, Massachusetts

Nonagricultural wage and salary employment was up 2.8 percent during the 12 months ending August 1998, to 1,965,700 in the Boston metropolitan area. Almost 54,000 new jobs were added to the economy during the period, accounting for nearly 40 percent of New England's job growth. The unemployment rate dropped to 2.4 percent from 3.5 percent in August 1997, one of the lowest rates in the Nation for metropolitan areas with populations of more than 1 million. Four of the area's major manufacturers recently announced possible employment cuts that could total up to 7,800 jobs by the end of the year. Raytheon plans to reduce its employment in the Boston area by 1,200 by the end of 1998, Gillette has announced a possible 4,700-job cut over the next 2 years, Teradyne plans to eliminate 1,000 jobs, and Intel will lose 900 jobs. It is likely, however, that these losses will be more than offset by gains in other sectors.

Housing demand remained very strong in the first 9 months of 1998 for both sales and rentals. Despite the increase in multifamily housing production since the beginning of 1996, supply has not kept pace with the demand for rental housing. Rising rents, combined with the elimination of rent control, have made Boston an attractive area for developers. Newly completed apartments report swift rent-ups. A 186-unit complex insured under FHA's Section 221(d)(4) program was completed in May 1998 and fully occupied by mid-September. Two-bedroom units in the development rent for $1,600 to $2,300. In July, two Virginia-based firms purchased a 781-apartment complex in Boston for $130 million and a 281-unit, newly built apartment complex in Waltham for $60 million. The recently signed Massachusetts Housing Bond Bill is expected to encourage affordable housing development, providing $296 million for rehabilitation and development of affordable housing.

Single-family home building permits rose 6 percent to 4,837 units for the first 9 months. According to the NATIONAL ASSOCIATION OF REALTORS^®, the median sales price in the Boston area for existing homes was $206,400 as of the second quarter of 1998, more than 6 percent above the same quarter a year ago. Condominiums are an important source of affordable sales housing in the Boston area. The Massachusetts Association of REALTORS¨ reported a 5-percent increase in the number of units sold in the Boston metropolitan area between second-quarter 1997 and second-quarter 1998. During the same period, the average condominium sales price rose 12.7 percent, from $149,086 to $168,079.

The Boston area's commercial property performance has also attracted national interest. Tourism and business growth have pushed hotel rates and occupancies up substantially. An estimated 2,000 to 3,000 rooms are planned to be constructed in the next 2 years. The Bayside Center Hotel near the planned South Boston Convention Center will offer 212 rooms, and the $100 million Hilton Hotel at Logan Airport will have 600 rooms.