The New England economy continues to grow and create jobs throughout the region. Non-farm wage and salary employment increased by 110,700 jobs (1.7 percent) from February 1998 to February 1999. Although 68 percent of the job gains were in Connecticut and Massachusetts, significant increases were recorded in Maine and New Hampshire -- 2.6 percent and 1.9 percent, respectively. The economy has kept labor markets extremely tight with unemployment falling to 3.1 percent in February 1999 from 3.7 percent in February 1998. Decreases were recorded in all six States, with Massachusetts having the lowest rate at 2.9 percent.

Total residential building activity, as measured by building permits, was off less than 2 percent in the first 3 months of 1999 compared with the same period in 1998. Single-family activity was up about 2 percent, but multifamily units were down 17 percent. The decrease in multifamily activity was most pronounced in Connecticut, where the number of units was down 50 percent from the comparable period in 1998, albeit on a very small basis. Both Massachusetts and New Hampshire reported substantial increases in multifamily housing permit activity. Much of the activity is in the Boston and Lowell metropolitan areas.

Most of New England's major rental markets are very tight. Vacancy rates are declining and rent increases are common. According to the U.S. Bureau of the Census, of the 12 States with the lowest rental housing vacancy rates in 1998, 5 were in New England. Only Connecticut had a rental vacancy rate of more than 3 percent.

While the construction boom of assisted-living developments for the elderly population in New England has been concentrated primarily in the region's urban markets, there has been a fair amount of activity in some of the northern, more rural, markets. With few exceptions, absorption has been relatively quick. However, with the recent additional units, some markets are experiencing a slowdown in rent-ups. The depth of the high-end, private-pay market in particular is questionable in some areas. The industry and local and State governments are looking at ways to broaden the market by making the product affordable to most elderly people.

Preserving and creating affordable housing in Massachusetts have been topics of discussion for several years as the economic recovery, real estate resurgence, and elimination of rent controls resulted in rising prices and rents. Heightened awareness of this problem among political, business, labor, and spiritual leaders has led to calls for action. Several recent studies document the dramatic need for affordable housing. There is a bill in planning in the State legislature for a State tax credit to stimulate the production of low- and moderate-income housing.

Spotlight on Springfield, Massachusetts

The Springfield metropolitan area, known locally as the Lower Pioneer Valley area, straddles the Connecticut River in western Massachusetts. The cities of Chicopee and Holyoke are also important urban centers in the area. The recession in the early part of the decade resulted in a significant decline in manufacturing employment in the area, with unemployment reaching a high of 9 percent. The Springfield area began to improve with increases in the services-producing sector during the past 5 years. As of February 1999, nonfarm wage and salary employment totaled 251,600, an increase of 2,500 jobs since February 1998. The unemployment rate declined to 3.8 percent in February 1999.

During the first 3 months of 1999, residential building permit activity was up slightly more than 6 percent over first quarter 1998. Since 1991 the area has averaged about 1,150 units annually, with more than 80 percent of the activity in single-family homes. The number of existing home sales in the Springfield area has been increasing during the past several years. Sales in the first quarter of 1999 are up more than 9 percent over the same period in 1998. Sales prices have also increased during the past 2 years after several years of flat or declining prices. The median sales price as of the fourth quarter of 1998 was $100,700, up 6 percent compared with the fourth quarter 1997 median.

The rental housing market in the area has also improved considerably during the past year. Rents for much of the 1990s had been declining as vacancy rates rose to double digits. However, as the economy of the area recovered and obsolete inventory was demolished, the excess supply from the late-1980s boom has been slowly absorbed. Vacancy rates are now much lower, in the 5- to 7-percent range, and the higher quality stock has recently experienced some increase in rents.

The turnaround is being felt throughout the Springfield metropolitan area. In the city of Springfield, both housing and office vacancy rates are down, and several major construction projects are under construction or in planning. These include expansion of the Basketball Hall of Fame, the Riverwalk, the Union Station transportation project, and a minor league baseball stadium. A successful homeownership program is under way as well. In the suburbs, several new industrial sites are being planned and the North-ampton State Hospital site is being redeveloped to include housing and commercial uses.