Regional Reports

Continuing the trend begun in 2001, nonagricultural employment in the New England region decreased by 74,500 jobs to 6,989,000 during the 12 months ending in March 2002. Although all six States in the region lost jobs, the more industrialized States of Connecticut and Massachusetts accounted for almost 90 percent of the total. Connecticut’s goods-producing industries accounted for virtually all of the job losses in that State, while in Massachusetts, the services sector recorded the majority of losses. Employment cutbacks in goods-producing industries were concentrated in manufacturing. Construction jobs are still increasing, particularly in Massachusetts, as multiyear commercial and infrastructure projects such as the Big Dig continue. Service industry jobs decreased in the region by 16,600 during the past 12 months. A larger decline in service employment was offset in part by service industry job increases in Maine, New Hampshire, and Rhode Island. The unemployment rate in the region was 4.1 percent in March 2002, up from 3.2 percent in March 2001. All States but Rhode Island experienced higher unemployment, with Massachusetts accounting for almost half the 297,200 unemployed in the region.

Most office and industrial markets in New England are showing signs of weakness, including increased vacancy rates, lower lease rates, and significant sublease space available in the first quarter of 2002. Retail sales overall have been flat because of strong competition and a weaker regional economy. However, supermarkets have performed well with increased sales spurring upgrades of existing stores and construction of new ones. These investments have provided strong anchor opportunities for many retail properties throughout the region. Additionally, Kohl’s Corporation recently opened 13 department stores in the Boston market, hiring 1,700 workers and utilizing existing space vacated by a recently bankrupt national retailer.

Overall residential construction activity, as measured by building permits, rose 14 percent to 9,450 units during the first 3 months of 2002 compared with the same period in 2001. Building activity, however, varied significantly between single-family and multifamily. Single-family permits were up almost 19 percent, whereas multifamily units permitted were down approximately 4 percent. Single-family activity was strong in Connecticut, Maine, New Hampshire, and Rhode Island; multifamily activity was down significantly in Massachusetts and Connecticut, where 72 percent of the region’s activity was concentrated during the past decade. The most significant reduction occurred in Connecticut, where multifamily activity declined by 70 percent in the first 3 months of 2002. This may lead to more job cuts in the State’s construction industry, which has been losing jobs since summer 2001. New Hampshire had the greatest increase in multifamily building activity, rising by more than four times the amount for the same period in 2001. Increased availability of labor and somewhat lower material and wage costs outside the Boston, eastern Massachusetts, and urban Connecticut markets may have contributed to the shift in the location of residential building activity.

The sales market in the New England States has been mixed. NATIONAL ASSOCIATION OF REALTORS^® (NAR) data indicated that following a 2.1-percent gain from 1999 to 2000, existing home sales in the region in 2001, at 256,500, were practically flat compared with 2000. Sales appeared to be decreasing in areas where available inventory is limited and price increases were greatest, as in Maine and New Hampshire. Sales have been rising in areas where supply is more plentiful, putting less pressure on pricing, as in Connecticut. According to the Office of Federal Housing Enterprise Oversight, in the fourth quarter of 2001 the New England region recorded the highest rate of home price appreciation, 9.9 percent, in the Nation, with each State ranking among the Nation’s top 20. Rhode Island’s 10.8-percent appreciation was the 2nd highest in the Nation, and Vermont’s 7-percent appreciation was the 18th highest. NAR data also indicated that the median sales price of an existing home in the Boston metropolitan area increased 13.5 percent between 2000 and 2001, to $356,600, but by the fourth quarter of 2001 that rate declined to 6.3 percent. Preliminary March 2002 data from the NAR and the Massachusetts Association of REALTORS^® indicated that the State posted sales gains of 9.6 percent for single-family homes and 16.9 percent for condominiums compared with a year ago.

Rental markets in New England continue to be strong. Despite the economic retrenchment during 2001 and the negative impact of September 11, most markets in the region have a shortage of adequate rental housing. Vacancy rates have increased slightly in some markets, and some pressure on rents has been defused at the high end of the market. Stamford, Connecticut had a vacancy rate of approximately 3 percent in the first quarter of 2002 and median rents for one- and two-bedroom units of $1,975 and $2,400, respectively. The rental market in Portland, Maine is still experiencing very low vacancy rates and limited availability, and in Burlington, Vermont apartment vacancies are almost nonexistent and rental units in short supply. The growing local economy, significant student populations at the University of Vermont and St. Michael’s College, and the State’s controversial environmental review process have severely limited additions to the Burlington area’s rental inventory. In Winooski, Vermont, adjacent to Burlington, an approved plan for the redevelopment of an old urban renewal area on the Winooski River includes office development, senior housing, market-rate family rentals, housing for UVM personnel, and some condominium ownership units. This mixed-use development will have a major impact on Winooski and the metropolitan rental market.