The New York/New Jersey regional economy continues to expand at a steady pace, with nonagricultural employment in the region up 1.8 percent (209,700 jobs) during the 12-month period ending June 1998. Employment in New York State increased by 129,100 jobs (1.6 percent), with gains in the services sector accounting for approximately two-thirds of the new jobs. During the same 12-month period, employment in New Jersey increased by 80,600 jobs, or 2.2 percent. New York State's unemployment rate was 5.5 percent in June 1998, a considerable decline from 6.5 percent in June 1997. New Jersey's unemployment rate was 4.8 percent in June 1998, down from 5.2 percent the previous year.

In New York City employment gains totaled 82,600 jobs (2.2 percent) between May 1997 and May 1998. Business services gained 20,000 jobs (7.6 percent) during the period. Securities employment in May 1998 stood at a record 162,700 level, 600 jobs above its December 1997 peak.

The New York State Association of REALTORS^® reported that single-family home sales in the first quarter of 1998 increased nearly 17 percent statewide from the same period a year ago. The median sales price increased 5.6 percent during this period to $130,200.

The sales housing market has been very robust in the New York City suburbs, particularly Westchester County, which led the State in the rate of increase in median sales price from the first quarter of 1997 to the first quarter of 1998. Sales in the first quarter totaled 1,379 homes, up 43 percent. The inventory of available homes for sale as of the first quarter was down 24 percent from the first quarter of 1997. Nassau County also experienced rising prices and a decline in inventory. Listings for single-family homes as of April 1998 totaled 5,979 units, 26 percent below April 1997.

Sales in New York City's cooperative and condominium market, according to local brokers, slowed in June 1998 from the rapid pace of the first 5 months of the year, in part due to resistance to increased sales prices. The rental market remains strong throughout New York City; however, rent increases in Manhattan during the first 6 months of 1998 are below the level of a year ago.

The sales markets in Upstate New York have improved in 1998, but prices are being held down by large inventories of available homes. In the Buffalo metropolitan area, home sales in the first 5 months of 1998 were up 12 percent over the same period in 1997. Home sales in the Rochester metropolitan area in the first quarter of 1998 were 16 percent higher than the comparable period a year earlier.

The New Jersey Association of REALTORS^® reported that the annual rate of home sales as of the first quarter of 1998 was up 11 percent over the first quarter. Southern New Jersey experienced the largest percentage increase, with first-quarter sales up 18 percent over those during first-quarter 1997.

Single-family home building permit activity in New York State for the first half of 1998 was strong (11,081 units), up 21 percent from the 1997 volume for the same period. Multifamily housing activity in the first 6 months of 1998 totaled 5,720 units, down 10 percent from the very strong level during the same period in 1997. In New Jersey single-family building permit activity totaled 11,633 homes in the first half of 1998, up 8 percent over the same period in 1997. Multifamily building permit activity (1,832 units) was down 7 percent.

Demand for office space in Manhattan is holding strong. As of May 1998, the office vacancy rate for Midtown had fallen to 6.4 percent and rents averaged approximately $41 per square foot annually. The vacancy rate declined nearly 3 percentage points and asking rents increased approximately 13 percent between May 1997 and May 1998. In Downtown the vacancy rate fell to 7.6 percent in May 1998, a decline of nearly 5 percentage points from May 1997, and rents climbed almost 16 percent during this period. Manhattan's hotel market continues to tighten. The occupancy rate was 80.5 percent in the first quarter of 1998, up 5.4 percent from a year earlier. The average room rate of $190 in the first quarter of 1998 was up 14 percent from a year earlier.

The Newark, New Jersey, commercial/office market is improving after years of decline. The opening in October 1997 of the $180 million Performing Arts Center in the heart of the financial district has helped create a demand for office space in the financial district, where almost all of the development activity is taking place. The recent sale for $78 million of the 738,000-square-foot, l8-story building near Pennsylvania Station known as Two Gateway Center was more than double the sales price for the building just 18 months earlier. Companies are not only acquiring office properties in Newark; they are spending heavily to upgrade them.

Construction is expected to begin soon on two major office buildings in Jersey City. Ground-breaking recently took place for the 14-story, 562,000-square-foot Newport Office III, the first major office building construction on the New Jersey side of the Hudson River in a decade. Construction is also imminent for a 12-story, 420,000-square-foot office building by Hartz Mountain Industries, Inc., in the Jersey City financial district. Groundbreaking recently took place for a 1.3 million-square-foot mall, one of the largest malls in the New York City metropolitan area, which is located on 110 acres in Elizabeth, New Jersey, near Newark Airport.

Spotlight on Albany-Schenectady-Troy, New York

The population of the Albany-Schenectady-Troy, New York metropolitan area (which includes Albany, Montgomery, Rensselaer, Saratoga, Schenectady, and Schoharie Counties) increased by only 2 percent to 876,420 persons from 1990 to 1997.

Nonagricultural employment in the Albany-Schenectady-Troy metropolitan area increased by 5,300 jobs (1.3 percent) to 430,000 between 1996 and 1997. As of May 1998, nonagricultural employment in the Albany area totaled 438,000 and the unemployment rate was 3.9 percent. The local economy depends heavily on State government employment. In the city of Albany there is a total of $240 million in major construction projects for the State government, including a $64 million office building for the State controller, a 2,400-car parking garage, a $65 million office building for the Department of Environment and Conservation, and a $75 million renovation plan for the Alfred E. Smith building. The construction projects will result in the relocation of State workers from other parts of the city to downtown and free up existing State office space for private use.

Since 1990 housing construction in the Albany-Schenectady-Troy, New York metropolitan area has averaged approximately 2,800 units per year, 75 percent of which is single-family homes. Most of the residential construction activity has been in Albany, Rensselaer, and Saratoga Counties. In the first half of 1998, the number of housing units that were issued building permits within the metropolitan area was up approximately 63 percent compared with 1997 levels. The increase is attributed to milder than usual weather during the first quarter, which allowed for earlier than usual construction starts.

Rental housing construction in the area's central cities has been limited to developments with some form of subsidy, such as Low Income Housing Tax Credits (LIHTCs). In the suburbs, market-rate apartment developments are typical. Overall, the rental market is balanced. Rents in the central cities are flat and increases in the suburban submarkets have usually not exceeded 2 percent.

According to data from the NATIONAL ASSOCIATION OF REALTORS^®, the median sales price of existing homes in the Albany metropolitan area increased a modest 2 percent to $102,700 between first-quarter 1997 and first-quarter 1998. During this same period, however, sales volume increased by almost 10 percent.