Regional Reports

Nonfarm wage and salary employment in New England declined by 35,300 jobs or 0.5 percent, in the 12 months ending February 2003, a slower rate of job loss than in the past several quarters. The loss of 42,900 jobs in the goods-producing industries was partly offset by a gain of 7,600 jobs in the service-producing industries. As in the past several quarters, Massachusetts and Connecticut account for most of the job losses in the region; the other four states recorded net job gains as of February 2003. The majority of goods-producing jobs lost were in manufacturing; however, construction jobs also declined as building slows and Boston’s Big Dig begins to wind down. All states lost goods-producing jobs; New Hampshire recorded the largest loss, 5.5 percent of its total. Service-producing industries gained 7,600 jobs, or 0.1 percent, despite losses in Massachusetts and Connecticut. Maine, New Hampshire, Vermont, and Rhode Island recorded job increases ranging from 0.8 to 1.4 percent. The unemployment rate in New England as of February 2003 was 5.5 percent, up slightly from recent months and up from 5.2 percent in February 2002. New Hampshire is the only state with a lower unemployment rate than 1 year ago, 4.1 percent, down from 4.8 percent in February 2002.

Although the unemployment rate in Massachusetts as of February 2003 was 5.7 percent, a recent study by the Northeastern Center for Labor Market Studies suggests that the Massachusetts economy may be worse than indicated by the unemployment rate alone. There was a total loss of 4.7 percent in wage and salary jobs between January 2001 and January 2003, the highest relative loss in the nation. Those who recently lost their jobs left the state at double the rate in 2002 as in 2001, and some who lost career jobs are working part time or are underemployed. Also, there was a 15-percent increase in out-of-state commuters between 1990 and 2000; unemployed workers who commute to Massachusetts from surrounding states would not be recorded in the Massachusetts unemployment rate but rather in the unemployment rate of the states where they live. Further evidence of the condition of the economy can be seen in the softening office market and the recent trends in hotel occupancy rates and wages. According to Spaulding & Sly, the commercial office vacancy rate is 23.3 percent in the greater Boston market area, 4 percent higher than a year ago. Downtown Boston asking rents range from $40–$52 per square foot, whereas only a couple of years ago at the height of the Internet boom there was speculation that rents would reach $100 per square foot. Boston-area hotel occupancy rates were down approximately 5 percent in the first quarter of 2002 compared with the previous year, room rates are declining, and hotel workers are being laid off. Although wages in Massachusetts are still higher than the national average by approximately 24 percent, wages fell at a rate of 5.2 percent between 2001 and 2002 compared with a 1.2-percent loss for the entire nation.

After a trend-breaking year in 2002 residential building activity in New England, as measured by building permits, was down for the first quarter of 2003 compared with the first quarter of 2002, a possible indication of a sluggish economy’s impact on housing demand. Before 2002 total permits issued declined by approximately 2.5 percent annually after a peak of 48,000 units in 1998. The significant construction of the past several years appears to be lessening, possibly because of the impact of continued job losses and economic uncertainty. Single-family construction activity was down in every state except Vermont. Multifamily activity was unchanged regionwide but varied considerably by state.

Existing home sales were greater in 2002 compared with previous years. Excluding Vermont (for which data were not available) the sales rate was up 5 percent as of the fourth quarter of 2002 compared with the same quarter in 2001, and the 2002 annual total was up 1.7 percent over 2001. New Hampshire and Rhode Island, however, recorded small declines in sales activity. For Boston, Providence, and Hartford, the three largest metropolitan areas in the region, the median sales prices for 2002 were $395,900, $193,200, and $175,900, respectively, according to the NATIONAL ASSOCIATION OF REALTORS^®.

According to the Office of Federal Housing Enterprise Oversight (OFHEO), the annual rate of home-price appreciation in New England was 10.6 percent as of the fourth quarter of 2002 compared with the fourth quarter in 2001. Rhode Island maintained the highest state rate of appreciation, 15.7 percent. Five of the 6 New England states ranked in the nation’s top 11 positions for appreciation; only Vermont had an appreciation rate of less than 9 percent. The national appreciation rate was 6.9 percent.

Single-family home sales in Massachusetts totaled 8,199 in the first quarter of 2003 according to the Massachusetts Association of REALTORS^®, a decline of 11 percent from the first quarter of 2002, due in part to severe winter weather and a weak economy. The average sales price for the period was $358,334. During the same period condominium sales volume was essentially unchanged at 3,025 units, with an average sales price of $246,572.

Generally rental markets throughout New England have softened but remain reasonably balanced. With the economy still sluggish and levels of production increasing, vacancy rates are increasing in some apartment developments and concessions such as 1-month’s free rent are being offered. Recent census data indicate that rental vacancy rates have increased, but not significantly. All six New England states are among the eight states with the lowest rental vacancy rates in the nation. New Hampshire and Vermont had the lowest vacancy rates, 3.4 and 3.8 percent, respectively, and Maine’s vacancy rate was the highest at 5.7 percent. New England’s rental vacancy rate overall is 4.7 percent compared with a 9-percent vacancy rate for the entire nation. The rental vacancy rate for the Boston metropolitan area in 2002 was 4.3 percent, up from 2.7 in 2000, and the Providence metropolitan area recorded a 5.1-percent rate in 2002, up from 4.8 percent in 2000. However, the rate in the Hartford metropolitan area declined to 4.6 percent in 2002 from 10.9 percent in 2000, due to a strong suburban rental market and aggressive demolition and conversion programs in the city of Hartford that have reduced supplies of excess vacant units.