Employment growth in the Pacific region has stalled with the slowdown in the economy. The region added only 13,500 new jobs in the 12 months ending June 2002, a 0.1-percent gain, compared with 529,000 jobs in the previous 12-month period, a 2.9-percent gain. San Jose’s high-technology economy lost 4.5 percent of its jobs during the 12 months ending June 2002. Nevada gained 14,000 jobs, a 1.3-percent gain, owing to a substantial improvement in tourism in Las Vegas during the past 6 months. Employment in Arizona is down less than 1 percent despite a decline in construction and 18 months of job losses in its high-technology manufacturing sector.

The regional labor market has loosened considerably in the past year, with unemployment increasing from 5.1 percent in June 2001 to 6.2 percent in June 2002. Hawaii’s 4-percent rate was lowest in the region. California’s 6.4-percent rate in June was the highest in the region. The San Jose area’s 7.6-percent unemployment rate was among the highest in the Nation for large metropolitan areas.

As favorable financial conditions continue, homes sold extremely well in most areas during the second quarter despite the weaker overall economy. Strong new home sales in most Pacific region market areas kept single-family production at high levels through the second quarter. Builders in the region recorded 101,700 permits in the first half of 2002, a 1.3-percent gain over the year-earlier period. Supported by gains of 6 percent and 9 percent in the Southern California and Sacramento areas, respectively, California recorded permits for 58,000 single-family homes in the first 6 months of 2002. In Arizona single-family activity was up 6.4 percent in response to continued strong demand and low inventories in both Phoenix and Tucson. The Las Vegas Housing Market Letter reported that more than 11,000 new homes were sold through June 2002, 2 percent above the record pace of 2001 for the same period.

In California homebuyers during the first 6 months of the year purchased existing single-family homes at the annual rate of nearly 600,000, 18 percent above a year earlier, according to the California Association of REALTORS^®. Even in the San Francisco Bay Area, total sales, new and resales, were up 27 percent over relatively low first-half 2001 levels but in line with sales rates in 1999 and 2000. Low levels of available inventory and strong demand drove prices to record levels in many parts of the State, but sales prices in Silicon Valley have fallen from their peak in 2000. Las Vegas resales for the first half of 2002 hit a record high, breaking the year-earlier level by 12 percent. In Honolulu, resales increased 14 percent in the first 6 months of the year as the market continued to recover from a decade-long slump.

As a result of declining rates of growth in rental demand and softer market conditions in many of the Pacific region’s rental markets, multifamily building activity in the first 6 months of 2002 was down considerably. Regional activity through June was down 30 percent to 23,600 units. Activity was down 55 percent in Arizona, 23 percent in California, and 36 percent in Nevada.

Phoenix rental markets have remained somewhat soft but stable over the past 12 months. Apartment vacancy rates were at approximately 8 percent in the past several quarters, reaching almost 9 percent in the seasonally slow second quarter, according to an Arizona State University survey. Phoenix builders have reacted by reducing multifamily production to 2,800 units in the first half of 2002, off 46 percent from the same period last year. The competitive conditions and vacancy rates in the 8- to 9-percent range are likely to persist at least through the remainder of 2002. The rental vacancy rate in the San Francisco Bay Area is stabilizing after increasing for 2 years from its low in early 2000. Markets in some North Bay counties remained fairly tight with rates well under 5 percent.

Conditions in the Las Vegas rental market have improved slightly in the past year but remain quite competitive. The rental vacancy rate as of June 2002 was 8 percent, down from earlier in the year. Concessions typically of up to 1 month’s rent remain widespread. The more competitive conditions contributed to a 30-percent drop in multifamily building permit activity in the first half of 2002.