The economy in the Northwest region continues to grow, but at a more moderate pace than a year ago. Nonagricultural wage and salary employment increased by 1.8 percent during the 12 months ending in June 1999. Idaho and Washington both recorded employment gains of 1.9 percent for the 12-month period, followed by Oregon at 1.8 percent. Employment gains in Alaska were negligible. Unemployment in the region in June was 5 percent, unchanged from June 1998, and ranged from 4.6 percent in Washington to 6 percent in Alaska.

Construction employment, wholesale and retail trade, and services buoyed the Washington State economy amidst declining manufacturing payrolls. In the past 12 months, the manufacturing sector has lost 16,000 jobs. A substantial share of the decline is attributable to Boeing's downsizing, which has caused the aircraft and parts sector to drop by 14,800 jobs. The U.S. Department of Labor is providing a 26-month, $20.4 million grant to help Boeing workers develop skills to acquire new jobs. Business services were particularly strong in Washington over the past 12 months, with growth rates in the 8-percent range in data processing and software development.

Alaska's employment growth through the second quarter of 1999 was notably slower than in the past 2 years. In both Oregon and Idaho, the services sector fueled the increase in employment. Oregon's goods-producing sector declined by slightly more than 5,000 jobs due to drops in lumber, machinery, and electronic equipment. Conversely, in Idaho the goods-producing sector increased by about 3,000 jobs.

Strong demand for housing sales continues to push sales activity upward. According to the NATIONAL ASSOCIATION OF REALTORS^®, the annual rate of sales in the Northwest increased 4 percent to 275,100 homes as of the second quarter of 1999. Sales in the Seattle metropolitan area in the first half of 1999 were up 4 percent, with homes selling within 30 to 40 days. In the city of Seattle, listings in some close-in neighborhoods are selling within 20 days or less. The median sales price for the area rose just under 9 percent to $200,000. The condominium market is still hot, especially in downtown Seattle. Condominium sales represented 18 percent of total sales in the metropolitan area in the first half of 1999. Sales and prices in the Boise area were up 5 percent or more compared with the first half of 1998. In the Portland area, sales were down about 2 percent compared with the 1998 volume for the first 6 months, but the median sales price was up 4 percent.

Homebuilding activity remained at a steady pace in the Northwest region through the second quarter. Single-family building permit activity through the first half of 1999 totaled 30,246 homes, down less than 2 percent from the same period in 1998. In the Seattle-Everett area, permit activity was off 7 percent to 5,106 homes. The drop reflects the availability of buildable lots and shortages of materials and construction trades. In the Portland area, single-family volume for the first 6 months of 1999 was almost equal to that for the same period in 1998. The Boise area remains the hottest market, for its size, in the Northwest. In the first 6 months permits were issued for 2,764 homes, an 8-percent increase over a very strong first half of 1998. The population in Boise increased by almost 34 percent between 1990 and 1998.

Multifamily building permit activity in the region during the first 6 months of 1999 totaled 12,246 units, a 7-percent increase compared with the same period in 1998. Activity in the Seattle metropolitan area was up a dramatic 20 percent to 5,124 units. Market conditions during the second quarter were balanced in most of the Northwest region's major rental markets. While close-in neighborhoods in the Seattle area are still tight, with vacancy rates of 4 percent or less, some suburban submarkets have begun to experience more competitive market conditions with the increase in vacancy rates. In the northern suburbs, vacancy rates are in the 4- to 7-percent range, and the 2- to 7-percent range in the south and southeastern suburbs. The downsizing at Boeing has had some effect on these markets, but many property managers point to increased homeownership and the growing supply of new apartments.

In Portland the rental market remains balanced overall, but some submarkets are becoming more competitive as a result of increased supplies and significant layoffs by nearby employers. Conditions in the Boise market have tightened in the past 12 months, with vacancy rates down to 6 percent or lower. Apartment construction slowed this year and demand is beginning to catch up with supply. The Anchorage rental market was still relatively tight, with vacancies in the 3- to 4-percent range. While there are several hundred units in the planning stages, rents are still not high enough to support construction.

Spotlight on Tacoma, Washington

The Tacoma area's economy is one of the strongest in the Northwest region. Employment during the 12-month period ending in June 1999 increased at an annual rate of 1.9 percent to 241,600. The unemployment rate as of June was 4.5 percent. The Federal government, trade, and services sectors are the mainstays of the Tacoma area's economic base, offsetting the recent declines in other sectors due to the Asian crisis and downturns in the area's high-technology employment. Federal government employment at Fort Lewis and McChord Air Force Base have remained relatively stable in recent years. The Department of Defense employs approximately 26,000 military and civilian personnel in the Tacoma area, which accounts for $1.3 billion in expenditures into the local economy.

During the past 12 months, strong employment gains were recorded in construction, retail trade, and services. The transportation sector has remained viable as the Port of Tacoma begins to gain a competitive edge over the Port of Seattle due to greater availability of land for expansion and relatively fewer traffic congestion problems. The manufacturing sector recorded declines during the past 12 months, due in part to Boeing's downsizing.

Expansion plans at the Intel chip manufacturing plant in DuPont were halted in Fall 1998, due to the effects of the Asian economic crisis and over-capacity in the chip and computer manufacturing industries. Intel laid off 650 production workers and closed their Pierce County assembly plant. They are maintaining the 1,200 employees at their DuPont research and development facility. Matsushita and Packard-Bell NEC both closed their plants in the area, laying off a combined total of nearly 600 employees.

Home sales continued to show strength, rising more than 20 percent in the first 6 months of 1999 compared with the first 6 months of 1998. The median sales price increased 4.5 percent to approximately $142,000, compared with $135,600 for the first 6 months of 1998. Listings in the first half of this year were up 15 percent, with homes typically selling in 3 months or less. Single-family permits for January through June totaled just under 2,400 units, a 2-percent increase over the exceptionally strong volume in the first half of 1998.

Rental housing market conditions have become more balanced throughout the Tacoma metropolitan area, paralleling the strong employment growth over the past 3 years. The Spring 1999 Dupre+Scott Apartment Vacancy Report reported an area-wide apartment vacancy rate of 5.8 percent, down from 6.0 percent in the Spring 1998 report and 7.1 percent in the Spring 1997 report. The increasing rents and tighter market conditions in the Seattle area have pushed renters to the Tacoma market, with its available supplies and lower rent increases. Average rents rose only 3.4 percent between March 1998 and March 1999.

Commercial real estate in the Tacoma metropolitan area has begun to garner attention as the area's population and housing markets continue to grow. Plans are currently under way to revitalize the Lakewood Mall located in South Pierce County near Fort Lewis. Plans would include a new city hall for the City of Lakewood, as well as office and retail space and residential units. Renovation plans are also under way for the 33-year-old Tacoma Mall regional shopping center. Tacoma's downtown waterfront, long an industrial area, is being planned for redevelopment into a mixed-use area that would include hotels, apartments, condominiums, and office and retail space. Commercial sites were recently marketed to developers and proposals are currently being reviewed. In another downtown venture, the city is loaning $750,000 to a developer to assist with plans for a multi-screen theater, shops, restaurants, and residential units on the northern edge of the business district.