The economy in the Northwest region continued to grow at a relatively rapid but slightly slower pace as of the second quarter of 1997. Nonagricultural wage and salary employment increased by 2.9 percent between the second quarter of 1996 and the second quarter of 1997, compared with a 3.5-percent annual rate of growth between the first quarter of 1996 and the first quarter of 1997.

Oregon led the region with the largest gain of 3.8 percent annually. Labor economists for the State of Oregon noted that the growth in manufacturing jobs in the State accounted for nearly two-thirds of the Nation's increase in manufacturing employment during the 12-month period ending in May 1997. As of the second quarter of 1997, employment in Washington State had increased by 3 percent due to gains in the aerospace and high-technology industries.

Labor markets continued to tighten throughout the Northwest. Regionwide there was strong demand for construction workers, general laborers, and entry-level retail and service workers. In Washington the unemployment rate as of the second quarter of 1997 was 4.9 percent, down 1.3 percentage points compared with the same period in 1996. The unemployment rate for second quarter 1997 was reported to be the lowest rate in almost 30 years.

The unemployment rate in Seattle was 3.5 percent compared with 5.1 percent in 1996. Labor shortages were severe in the area, especially in the computer technology, administrative, and accounting fields. The unemployment rate in Portland was 3.9 percent, and Boise had the lowest unemployment rate in the region at 3.4 percent.

Strong economic growth in this region continued to fuel population gains. Three of the States in this region ranked in the top 10 fastest growing States in the Nation based on the percentage of increase between April 1990 and July 1996. Idaho ranked third (18.1 percent), Washington ranked sixth (13.7 percent), and Oregon ranked ninth (12.7 percent).

Single-family building permit activity in the Northwest region totalled 28,842 units for the first 6 months of 1997, a 5-percent drop compared with same period in 1996.

Activity in Washington decreased by 8 percent to 14,837 units, but the Seattle area reported increased activity of 3.8 percent (5,070 units). The volume of single-family permit activity in Oregon (8,898 units) in the first half of 1997 was almost equal to the volume in the first half of 1996.

In Washington existing home sales were booming in most of the Puget Sound area. Resales totalled 21,220 homes statewide during the first quarter of 1997, an 8.2-percent increase compared with the first quarter of 1996. However, sales were down in Spokane, Yakima, and the Tri-Cities (Richland-Kennewick-Pasco) areas. The median sales price as of the first quarter of 1997 for an existing home in Washington was $147,200, 5.8 percent higher than the same period in 1996.

According to the Puget Sound Association of REALTORS^®, sales in the Seattle metropolitan area for the first 6 months of 1997 increased by 6.4 percent, and the median sales price during the first 6 months of 1997 increased by 5.3 percent to $173,000, compared with the same period in 1996.

Oregon was second only to Michigan in house price appreciation during 1996, according to HUD's Office of Federal Housing Enterprise Oversight. The average rate of appreciation for the State was 8.8 percent from the first quarter of 1996 to the first quarter of 1997. For the 5-year period from 1992 through 1997, the median house price for the State of Oregon rose by 56.5 percent, compared with 15.5 percent for the Nation. In Idaho the median house price increased by 4.4 percent between the first quarters of 1996 and 1997 -- the 18th-highest increase in the Nation. For the 5-year period of 1992 to 1997, the median house price in Idaho increased by 41.3 percent -- the fifth-highest increase in the Nation.

Multifamily building permit activity in the Northwest region decreased by 10 percent to 10,106 units in the first 6 months of 1997 compared with the same period in 1996. All States reported drops in activity, with the largest percentage of declines in Alaska and Idaho. In Oregon and Washington, permit activity was down 5 percent (4,441 units) and 9 percent (4,967 units), respectively.

Rental market conditions remained mixed across the region. The market showed some improvement in Boise, Idaho, but was still somewhat soft with an 8-percent vacancy rate. The added supplies of new apartments in Portland and Salem, Oregon, have effectively eased demand pressures. The rental vacancy rate in Portland was 5.5 percent. Multifamily permit activity in the Portland area declined by 25 percent in the first half of 1997 compared with the same period in 1996. The decline was attributable to a cutback in unincorporated Washington County in the vicinity of U.S. Highway 26 in response to a saturated submarket. This submarket accounted for approximately 9 percent of the State's multi-family permits in 1995 and 17 percent in 1996.

Except for the Seattle-Everett area, rental market conditions throughout Washington were more soft than balanced as of the second quarter of 1997. The Seattle-Everett area remains tight, despite the significant increase in activity the past 3 years. From 1994 through 1996, permits were issued for more than 15,000 units. Activity for the first half of 1997 increased by 12 percent (2,868 units) compared with the same period in 1996. According to the March 1997 Dupre+Scott Apartment Vacancy Report, the rental vacancy rate in the Seattle metropolitan area was less than 3 percent. Rental vacancy rates were 2 percent or less in most close-in neighborhoods of Seattle and eastern King County (Bellevue). The average rent in King County for a two-bedroom, two-bathroom unit was $771, which reflected a nearly 5-percent increase during the 12-month period ending in March 1997. In Snohomish County, the average rent for a similar unit was $615 -- also a 5-percent increase. Given current multifamily housing production levels, demand will far exceed supply during the next 12 to 18 months. According to the Vacancy Report, rent increases of 6 to 8 percent or more in tighter submarkets are expected over the next 12 months.

Spotlight on Tacoma, Washington

The Tacoma area (Pierce County) economy has shown substantial growth over the past 4 years. Between the second quarter of 1996 and the second quarter of 1997, nonagricultural wage and salary employment increased by 10,200 jobs.

This is an impressive 4.6-percent annual rate of growth -- the area's highest annual rate of growth in the past 4 years. As of the second quarter of 1997, the unemployment rate had decreased by 4.6 percent -- down 1.8 percentage points from the same period in 1996. The largest absolute gains during the period occurred in manufacturing, finance, insurance and real estate, and services.

The largest single employer in the Tacoma area is the U.S. Department of Defense. The U.S. Army's Fort Lewis installation has more than 23,600 military and civilian personnel, and nearby McChord Air Force Base employs another 7,200 military and civilian personnel. The Boeing Company is the area's second leading source of employment. Boeing's Pierce County plant employs about 1,000 workers, and more than 12,000 Tacoma-area residents commute to the company's facilities in adjacent King County.

The most prominent economic development in the Tacoma metropolitan area was the recent completion by Intel of a chip production plant in the city of Dupont. The plant opened about 12 months ago and now employs approximately 1,500 persons. Intel plans to begin construction sometime in 1997 on its third building at the site and will add between 500 and 700 jobs, primarily in research engineering. By the year 2003, employment is expected to grow to 6,000 jobs.

The city of Tacoma had several redevelopment projects under way during the first half of 1997 that will enhance the downtown area. A branch campus of the University of Washington is under construction. The campus will accommodate 6,000 students by the year 2010. In addition there are plans to redevelop the land around the Thea Foss Waterway on Commencement Bay in downtown Tacoma. The redevelopment plans include the creation of an esplanade along the 3.5 miles of waterfront that will include retail and residential development. A planned pedestrian bridge across the freeway will link the esplanade with downtown Tacoma. The city is currently working to clean up all contaminants from this former industrial site to promote future development.

The demand for housing in the Tacoma metropolitan area remains at modest levels despite the strong economic conditions in the area and in the Puget Sound region. Local analysts have been perplexed by the softer housing market conditions in Tacoma compared with the other markets in the Puget Sound region (Seattle-Everett and Olympia). It is anticipated that rapidly declining supplies and increasing costs in the Seattle metropolitan area will eventually shift demand to the Tacoma market.

Sales of new and existing houses increased slightly in 1996 to 4,702 units. However, activity so far in 1997 is down about 9 percent. Through May 1997, sales totalled 1,674 homes based on data from the Multiple Listing Service (MLS). Compared with other areas in the Puget Sound region, homeownership remains affordable in Pierce County. As of the second quarter of 1997, the median sales price for new and existing homes in the Tacoma area was $127,000, compared with $167,600 in the Seattle area. Single-family construction in the Tacoma area has averaged approximately 3,700 homes annually since 1990. For the first 6 months of 1997, permits were issued for 1,923 homes -- only 1 percent less than the volume for the same period in 1996.

As of the second quarter of 1997, the rental market continued to exhibit signs of softness in the majority of the Tacoma area's submarkets. The estimated overall vacancy rate for the second quarter in 1997 was 7.1 percent, down a 0.7 percentage point from the same period in 1996.

The Dupre+Scott Apartment Vacancy Report noted that average rents in Pierce County have risen by only a few dollars in the past year. The March 1997 survey reported that monthly rents averaged $430 for one-bedroom units and $617 for two-bedroom, two-bathroom units, excluding utilities. For the first 6 months of 1997, building permits were issued for 425 units, compared with 515 units over the same period in 1996.