The Northwest's economic expansion continues to be led by the aerospace and high-technology industries, with substantial gains as well in the construction, services, and trade sectors. Non-agricultural wage and salary employment as of June 1998 was up 2.7 percent (128,300 jobs) over June 1997. Employment increased 3.2 percent in Washington, 2.3 percent in Oregon, 1.9 percent in Alaska, and 1.6 percent in Idaho. The unemployment rate in the Northwest region was 5 percent as of June 1998, 0.3 percentage points below the rate in June 1997. Labor markets remained very tight in the major metropolitan areas in the Northwest, especially in Seattle, where the unemployment rate has dropped to 2.8 percent. Critical labor shortages are reported in many fields.

The economic outlook for the Northwest region remains optimistic. Employment growth in 1998 will be relatively strong because of the multiplier effect of jobs created by Boeing in 1996 and 1997. Boeing employment has been flat since the start of the year and the company is expected to reduce its Seattle workforce by several thousand during the next 18 months. Though still a very strong rate, Seattle area employment growth through the second quarter of 1998 has been slower than previously, 4.9 percent for the second quarter of 1998 over second-quarter 1997, compared with 5.7 percent growth during the comparable period from 1996 to 1997. Local sources predict job growth for 1998 to be about 4.5 percent, but to then drop to about 2.5 percent in 1999.

Single-family permit activity in the Northwest for the first half of 1998 totaled 30,758 units, up 7 percent from the first 6 months of 1997. Idaho reported the largest percentage gain of 17 percent, followed by Washington with 10 percent and Alaska with 4 percent. Multifamily housing permit activity in the region totaled 11,463 units in the first half of 1998, 13 percent higher than the same period in 1997. Alaska reported the greatest increase, 104 percent, followed by Washington with 37 percent and Idaho with 8 percent. Activity in Oregon was down 17 percent in response to slower growth in rental demand.

Activity in Washington State is primarily in the Seattle area, where the apartment market remains extremely tight. Residential construction in Seattle is still falling short of demand. One of the major roadblocks continues to be the lack of affordable or easily developable land. Local sources report that lengthy permit processes and labor shortages are also having an impact. Builders are now considering smaller lots and infill projects, regulatory offices have pledged to move building permits faster, and labor unions are expanding apprentice training programs.

Housing prices in the Seattle area are rising rapidly. The median sales price was $186,475 in the second quarter of 1998, a 14-percent increase over the second quarter of 1997. Local sources continue to report tight market conditions in rental housing in the metropolitan area, particularly in the city and close-in suburbs. A recent survey by Dupre+Scott of approximately 112,000 units reported an increase in rents of 9 percent between the spring of 1997 and the spring of 1998. The Center for Real Estate Studies ranked Seattle as the top metropolitan area in the Nation for rental property investment.

Existing home sales in Oregon during the first 6 months of 1998 were up nearly 10 percent over the volume in the first 6 months of 1997. In Portland the median price of a home sold in May was $155,000, a 6-percent increase over May 1997. The National Association of Home Builders ranked Portland and Salem in the top 10 least affordable metropolitan housing markets in the Nation.

The sales housing market in Idaho recorded a healthy first half of 1998, with sales slightly behind 1997's near-record pace. In Boise, sales through June were up 14 percent compared with the first half of 1997 and the median sales price had increased 5.2 percent to $108,850.

Except for Seattle, most of the rental markets in Washington State are soft. The market for new rental units in both Portland and Eugene is very competitive, and developments are offering incentives to speed lease-up. In Boise, the rental market has improved. An apartment vacancy rate of 6.5 percent was reported as of the second quarter, down from 8.5 percent during the second quarter of 1997.

Spotlight on Bellingham, Washington

Bellingham, located in the northwestern corner of the State on Puget Sound, is 90 miles north of Seattle and 55 miles south of Vancouver, British Columbia. The area is home to Western Washington University, which has more than 11,000 students. The exchange rate in the late 1980s favorable to Canadian shoppers resulted in employment growth near 9 percent annually. In recent years, however, the exchange rate has made Canadian retailers more competitive and cross-border shopping is now back to Canada. As a result, nonagricultural wage and salary employment has increased only 1.8 percent annually between 1990 and 1997. The outlook for the local economy remains one of modest growth.

The Bellingham metropolitan area has experienced substantial in-migration since 1990, particularly from California. The population of the area in mid-1997 was estimated to be 156,200, an increase of 28,400 persons, or 22 percent, since the 1990 census.

During the past 5 years, building permits have been issued for an average of 1,000 single-family homes annually. A total of 500 homes were permitted during the first 6 months of 1998. Home sales totaled 534 in 1997, a 14-percent increase compared with 1996. During the second quarter of 1998, sales were up 8 percent compared with the second quarter of 1997. The median sales price as of the second quarter was $131,000.

After 8 years of sustained apartment construction averaging 630 units annually, multifamily permit activity for the first 6 months of 1998 was down 47 percent compared with the first 6 months of 1997.