Mid-Atlantic employment gains in 1997 were the highest in recent years, due to increased residential and commercial construction and expansion in business and telecommunications services. In the 12 months ending November 1997, more than 258,000 jobs were added, a 2.1-percent increase from the comparable 1996 period. The service sector is growing at nearly double the overall rate, reporting 139,600 job additions, more than one-half of the Mid-Atlantic total. All States and the District of Columbia are reporting service-sector growth. Forecasts for 1998 are for continued job gains at the recent pace.

Greater job opportunities reduced unemployment in all States and the District of Columbia last year, with the heavily industrial States of Pennsylvania and Maryland averaging monthly unemployment rates of 5.1 percent and 4.7 percent, respectively, well below comparable 1996 levels of 5.4 percent and 5.1 percent. Rates hovered slightly above 4 percent in faster growing Delaware and Virginia. In the District of Columbia and West Virginia, 1997 rates were the lowest in years, at 7.7 percent and 6.8 percent, respectively.

Existing home sales in 1997 rebounded or remained strong due to improved employment conditions and favorable interest rates. Resales for 1997 totaled more than 462,000 homes, a 6-percent gain over a very good 1996. In the Washington, D.C. metropolitan area, resales were up 21 percent in 1997 to 57,693, the highest annual volume of the 1990s. Market share shifted slightly to the District and Northern Virginia, which accounted for more than one-half of the volume. Existing home sales in the District of Columbia were up 53 percent for the year to more than 5,000 units. Sales in the Maryland suburbs grew by 11 percent, while Northern Virginia sales increased by 22 percent to 25,527. As a result of the continued high volume of new construction, sales prices in much of the Washington area have not kept pace with the rate of inflation during the past 6 years. In a number of areas, prices have remained flat or have dropped during this period. However, the median sales price for existing homes in 1997 was up 3.5 percent according to the NATIONAL ASSOCIATION OF REALTORS^®.

New home sales in the Washington area were flat through much of the first half of 1997 but rebounded starting in the Fall, making total 1997 volume comparable to the volume in 1995 and in 1996. Strong activity is expected in the Spring in the Northern Virginia suburbs. Growth in Loudoun and Prince William Counties parallels the growth in high-technology jobs in the Dulles corridor area. The recently announced expansions by UUNet Technologies and the Baan Company will add 4,000 jobs. As a result of the impact of increased growth on services and infrastructure, several outlying counties are considering antigrowth measures. Loudoun County recently cut by 70,000 the number of houses that could be built in the Dulles South area. Prince William County officials proposed a measure to curtail new residential development that would reduce the number of lots available for development by approximately 30,000.

New home sales in the Baltimore area showed improvement in the third quarter, but 1997 activity through the first 9 months was still below the comparable 1996 level. Townhouse sales have been sluggish but sales of detached, single-family homes and suburban condominiums were brisk in 1997.

Single-family building permit activity in Virginia and Pennsylvania in 1997 was close to the volume for 1996, but permits in Maryland were down 8 percent from 1996, the third straight year of declining activity.

Conditions are balanced in most of the region's major rental markets. Multifamily building permit activity was up by 22 percent in 1997 to 24,681 units. All states except Virginia reported significant gains, including a 50-percent increase in Pennsylvania and a 63-percent gain in Maryland. Activity in Virginia in 1997 was down 10 percent from a very strong 1996 after 6 years of successive increases.

New apartments in the Baltimore area have met with immediate market acceptance in both the moderate rent range (built through the tax-credit program) and high-end luxury units. In the Pittsburgh area, apartment occupancy is generally more than 95 percent. Conversions of older offices and warehouses to apartments in downtown Philadelphia and Richmond are increasingly popular with young professionals.

Spotlight on Philadelphia, Pennsylvania/New Jersey

Employment gains in the Philadelphia metropolitan area totaled 30,900 jobs for the 12-month period ending November 1997, a 1.4-percent growth rate that was slightly ahead of the comparable period in 1996. Job gains in the suburbs have been fairly steady since 1993, averaging slightly less than 2 percent a year. The unemployment rate in the metropolitan area has dropped to 4.9 percent from 5.4 percent in 1996. The unemployment rate in Philadelphia was also down to 6.7 percent compared with 7.1 percent in November 1996. Continued job growth in the range of 1 to 2 percent is expected for 1998.

The merger of CoreStates Bank with First Union Corp. will result in an estimated 3,000 to 6,000 layoffs in the banking sector. Medical services will continue to contract in 1998 based on the November announcement that 1,200 layoffs are planned by Allegheny Health due to reduction in Medicare and Medicaid payments. The 1997 agreement by a German shipbuilder to lease part of the Philadelphia shipyard guarantees that 700 jobs will be retained for the next 5 years. These jobs are the result of cooperative agreements with labor unions and city and State subsidies for reconstruction of the yard and worker training. The creation of 1,000 waterfront jobs is also expected to result from an agreement to handle high-speed transatlantic cargo ships after they have been retrofit at the yard. A major share of job growth, however, will continue to occur in the suburbs as service industries continue their rapid expansion.

Other economic developments in the city include construction of 12 hotels and expansion of the convention center. The current convention center, at approximately 400,000 square feet, is unable to compete with Boston and Washington, D.C., for larger trade shows that require 600,000 or more square feet. Up to 2,000 additional hotel rooms will be added, increasing the downtown supply by nearly one-third. In addition, 5 lower floors of the Rittenhouse Regency office building will be converted to 192 hotel rooms, whereas upper floors will continue to house 212 apartment units.

City efforts, in conjunction with HUD funds, are emphasizing upgrading of housing, homeownership opportunities, and neighborhood improvement to retain population, which has declined by more than 100,000 since the 1990 census. The $45.6 million Homeownership Zone grant, $10 million Philadelphia Housing Authority fund to rehabilitate scattered-site rentals, and $50 million HOPE VI grant for public housing renovation has upgraded or built at least 862 units in the past 4 years, of which 600 have become available for homeownership to moderate-income families. Prices have remained in the $43,000 to $46,000 range. The first phase of the 178-unit West Poplar development in the Homeownership Zone was sold before construction was completed, and phase 2, which is scheduled to begin this year, is already sold. At least 20 percent of these 300 homes have been sold to middle-class families earning 120 percent of median family income. The $6.8 million set aside by Mellon Bank for mortgages will finance 150 of the 500 townhouses now under construction in a close-in neighborhood. Construction is proceeding and dozens of units have already been sold. Mellon is also providing $1.2 million for home-repair loans in the 635-unit Yorktown development.