Employment growth slowed in Rocky Mountain States during the third quarter. The most dramatic slowdown occurred in Utah, as cutbacks in high-technology employment dampened growth in most other sectors. Annual employment growth in Utah slipped to less than 3 percent in the third quarter, down from rates that hovered near 4 percent in the first quarter of 1998 and well below the 5- and 6-percent gains typical from 1994 to 1996. Colorado is now the fastest growing State in the region, but its growth rate dipped to the 3- to 3.5-percent range after beginning the year with a growth rate close to 4 percent. North Dakota's gain was near 2 percent. By September, the annual growth in employment had dropped below 1 percent in Montana, South Dakota, and Wyoming. Weakness in farm incomes and a pullback of energy exploration explain much of the slowdown in these States.

Labor markets in most of the region remain tight. Unemployment in the Dakotas is virtually nonexistent, as South Dakota's 2.4-percent rate in September placed it in a tie for the second-lowest rate in the United States, while North Dakota's 2.5-percent rate was not far behind. Colorado and Utah also posted low September unemployment rates: 3.5 percent and 3.3 percent, respectively. Difficulty in filling entry-level jobs is blamed for some slowing of employment growth in trade and services. Nevertheless, these two sectors accounted for more than half of the new jobs created in the region during the past year.

The retail, office, and industrial markets in Colorado Springs, Fargo, and Salt Lake City continue to tighten. Vacancies remain low and rents have increased despite accelerated construction activity. New commercial space has been quickly absorbed. Colorado Springs' first speculative office building since the 1980s was fully leased on completion. The outlook for the commercial markets next year is for continued growth. There are some concerns about overbuilding the lodging market in the Denver area, but other commercial sectors are balanced. For the first time in several years, plans are being discussed for speculative office space in downtown Denver.

Construction of multifamily housing units in the region as a whole surged though the third quarter and is well ahead of last year's pace. Through September, multifamily permit activity in the Rocky Mountain region totaled 17,368 units, up 25 percent. A dramatic 50-percent increase in the Denver-Boulder area pushed the total for the region up substantially. Regionwide single-family permit activity is up 8 percent from last year, to 44,139 homes.

Rental housing vacancy rates have improved in Colorado Springs and Fargo because of cutbacks in construction last year. Denver's vacancy rate has remained stable even with the recent surge in new apartments. The Salt Lake City area is still absorbing a large number of high-rent units built earlier in the decade, and this has been reflected in a rising vacancy rate. Affordable projects compose a higher proportion of new development in the Salt Lake City and Colorado Springs areas than in the recent past. Some midsized markets have seen little apartment development that is not stimulated by the Federal Low Income Housing Tax Credit program. The Denver area has also had some tax-credit development, although high-rent developments still dominate in the pipeline.

Existing home sales in the Denver area through the third quarter were 14 percent ahead of the total for the first three quarters of 1997. Last year's record for sales activity is almost certain to be short lived, as even a modest fourth quarter will push total sales in 1998 to a new record. The average sales price is up 10 percent from the same time period last year. The easing of price increases during 1996 and 1997 has been dramatically reversed in 1998. The annual increase in average price reached double digits early in the year and has slowed only slightly since then. Condominium prices are increasing considerably faster than are prices for single-family detached homes. The condominium average has been pushed up by several sales for $1 million or more at a new luxury development in the Cherry Creek area and by sales of high-priced loft units in downtown. Listings are down 6 percent from 1 year ago, as the frenzied sales pace of the summer has limited choices for potential buyers. Second-home sales are booming at Colorado resort areas. New developments sell quickly and brokers report a shrinking inventory.

Activity in the single-family sales markets in Salt Lake City and Colorado Springs has slowed from the rapid pace of the mid-1990s. Yearend totals are not expected to be at record levels. Price increases have slowed, and there is some buildup of inventory. The first-time homebuyer and move-up markets remain strong, but higher priced homes are on the market longer. Townhouse and condominium sales activity slowed, and price increases moderated in the third quarter. Despite the modest inventory buildup in these areas, the local sales markets are expected to remain balanced throughout next year.

Spotlight on Cheyenne, Wyoming

Cheyenne, with a population of 54,000, is the largest city in Wyoming. The economy is primarily based on government-related employment because of the presence of F.E. Warren Air Force Base (AFB) and the State government. The area is beginning to bounce back from the near-zero growth rates of the past 3 years. Efforts to diversify the local economy have resulted in new businesses in communications, finance, manu-facturing, and computer software. A number of existing businesses have announced growth plans, which will add several hundred new jobs over the next few years. This growth will add to the continued steady growth of the government sector, including increased activity at Warren AFB. The base has approximately 4,000 military and civilian personnel. The base and other area DoD employment (close to 400) bring more than $200 million to the local economy annually.

Single-family permit activity of 241 homes is up by 11 percent for the first 9 months of 1998 compared with the same period in 1997. Builders have concentrated on the price range of $110,000 to $150,000, for which demand remains firm. Prices may rise, however, because of the shortage of low-cost lots. Multifamily housing permit activity, 109 units through September 1998, has declined after the surge in activity to 677 units in 1997. From 1990 through 1996, multifamily permit activity in the area averaged 190 units annually. Much of the multifamily activity in 1998 has been in townhouses and duplexes for home-ownership.

The sales market improved during the third quarter. Sales activity increased slightly, and the average sales price rose to nearly $112,000, a 5-percent increase from 1997's third-quarter level. Both the number of listings and the average days on market have begun to decline, reversing the trend since 1994. There is some excess inventory of homes priced higher than $200,000. Townhouses and condominiums are becoming more popular with retirees. New luxury townhouses in the $170,000 to $200,000 price range are selling well. Existing townhouse and condominium sales activity nearly doubled during the third quarter compared with the third quarter of 1997.

The rental market is somewhat soft but improving. Some 300 tax-credit units in several developments came online during 1997. The develop- ments took up to 12 months to reach sustaining occupancy, much longer than expected. The rental vacancy rate for the area remains close to 10 percent. The market will be further tested when another 130-unit tax-credit project now under construction is completed at the beginning of next year.