Economic expansion in New York and New Jersey has proceeded at a slower pace in the first half of 1999 than in 1998. In the 12 months ending in June 1999, employment in New York State increased by 140,600 jobs (1.7 percent), surpassing the prerecession peak. Employment in New Jersey increased by 57,600 jobs (1.5 percent) during the same period. The unemployment rate in New York continues to decline, hitting 5.0 percent in June, down three-tenths of a percentage point from June 1998. The unemployment rate in New Jersey of 4.9 percent was up slightly compared with June 1998.

Upstate New York, where employment had been declining early in the decade, is starting to participate in the economic expansion, according to a recent report by the Federal Reserve Bank of New York. During 1997 and 1998, private sector employment increased at an annual rate of 1.2 percent, with gains in the Albany, Syracuse, Rochester, and Binghamton metropolitan areas of between 1 and 2 percent annually. In the Utica-Rome metropolitan area, the annual rate of growth was 2.5 percent, and in the Elmira metropolitan area, employment increased 2.8 percent. Employment in the Buffalo metropolitan area has remained unchanged.

Employment in New York City increased by 74,400 jobs (2.1 percent) between June 1998 and June 1999. The unemployment rate was 6.6 percent as of June 1999, down from 7.5 percent in June 1998. Local sources expect the rate of employment growth in 1999 will be about half that of 1998, as layoffs in manufacturing and financial services partially offset gains in business and consumer services.

Residential building permits in New York State increased to 19,663 units during the first half of 1999, up 17 percent from the same period a year ago. Multifamily activity in the State was up 34 percent. In New Jersey, permit activity totaled 16,072 units during the period, an increase of 19 percent over the same period a year ago.

The annual rate of statewide home sales in New York State as of the second quarter of 1999 was down less than 5 percent from very strong volume in 1998, according to the NATIONAL ASSOCIATION OF REALTORS^®. Part of the decline is due to the fact that inventories of available homes are much lower than previously, particularly in the suburbs around New York City. Inventories are down 35 percent in Nassau and 25 percent in Westchester. Even in Buffalo, where the economy is sluggish, there are 10 percent fewer homes on the market than a year ago, while home sales are approaching record levels. The NATIONAL ASSOCIATION OF REALTORS^® reported that the annual rate of existing sales in New Jersey as of the second quarter of 1999 was up 16.2 percent, compared with the second quarter of 1998.

The Manhattan rental housing market remains strong, although some local real estate agents have expressed concern over the projected addition in 1999 of close to 4,000 high-rent, market- rate units. Manhattan's office market has begun to stabilize. Rents have leveled off, and vacancy rates have stabilized after 2 years of declines. Hotel occupancy in New York City, while remaining high, has declined from peaks achieved in early 1998. In April 1999 the occupancy rate was 81 percent, down from 84 percent a year earlier. Room rents are running approximately 5 percent higher than a year earlier. In 1998 room rates increased about 10 percent over 1997 rates.

New York City's New Housing Opportunities Program is producing affordable housing for middle-income residents in the boroughs outside of Manhattan. This program, whose first round of funding took place in 1998, provides developers with construction and permanent financing as well as a subsidy of up to $30,000 per unit. Developers are also eligible for tax abatement from the city. In the program's first round, $113 million was provided to 15 projects with a total of 1,061 residences. Four of the projects have been completed and the remainder will be completed over the next 12 months. Under the second round of financing announced in March 1999, $150 to $175 million is expected to be given over the next year to produce 1,200 to 1,500 more units.

There are currently some 3,000 housing units. Most of them are luxury rentals in various stages of development in the towns of Jersey City, Hoboken, Weehawken, and West New York. One nearing completion is a 276-unit luxury development in West New York, known as the Landings. It is the first phase of the Port Imperial North residential community, which is planned to eventually have 4,300 housing units. A second rental development community is midway through construction, and construction is scheduled to start in October on a 180-unit condominium.

Spotlight on Rochester, New York

The Rochester, New York metropolitan area, with 1,082,000 residents, has experienced only a 2-percent increase in population since 1990, while the city of Rochester, with 217,000 residents, has lost almost 6 percent of its population. The area has a diverse labor market, with a well-educated, professional workforce. The local economy is dominated by several large manufacturing companies, including the Eastman Kodak Company, Xerox Corp., and Bausch & Lomb, Inc. During the 1990s all three companies were restructured and reduced employment. Kodak recently announced plans to eliminate 1,300 area jobs and sell its Elmgrove facility in Gates, where it manufactures cameras, copiers, and slide projectors. It is anticipated that over the next 3 years 4,500 employees will be relocated to Kodak Park in Rochester and other company facilities in the metropolitan area.

From June 1998 to June 1999, nonagricultural employment in the Rochester metropolitan area increased a modest 0.4 percent to 548,800. Employment increases occurred in wholesale and retail trade, the service sector, and in local government. The unemployment rate for the Rochester metropolitan area was 4.1 percent in June 1999, up from 3.7 percent a year ago.

From 1990 through 1998, residential building permits were issued for a total of 29,142 units in the Rochester metropolitan area. Single-family homes have accounted for 82 percent of the activity. In the first 6 months of 1999, permits were issued for a total of 1,256 housing units, a 9-percent increase above 1998 activity for the comparable period.

A broad range of new single-family homes is being built throughout the metropolitan area. Starter homes in the area are typically priced between $100,000 and $140,000. The move-up market is the most significant part of the new home market, with prices in the $170,000 to $200,000 range. In the more affluent eastern suburbs, new homes are typically priced in the $250,000 to $350,000 range. Recent resales activity in the area parallels that of the strong homebuying experience seen in the rest of the Nation. According to the New York State Association of REALTORS^®, more than 9,800 homes were sold in 1998 and 3,417 homes were sold during the first 5 months of 1999.

Apartment construction in the Rochester area during the past 5 years has been significantly greater than early in the decade. From 1994 through 1998, the annual multifamily permit activity in the area ranged from 700 to 800 units, compared with approximately 400 units annually from 1990 through 1993. The properties have consistently been absorbed in a timely manner, and the recently completed high-rent developments leased-up very quickly. There are at least two multifamily rental properties proposed for development: Perinton Apartments, a 220-unit development, and Jordache Park Apartments with a 104-unit development.