The economy in the New York/New Jersey region continued a slow but steady improvement during 1997. Employment in New York State increased by 116,000 jobs (1.5 percent) during the 12-month period ending in November 1997. The State's unemployment rate was a relatively high 6.2 percent in November 1997, but New York City experienced a significant unemployment decline in the 12 months ending November 1997, when the city's jobless rate was 8.7 percent, the lowest level since June 1996. The city's biggest job growth in the 12-month period ending November 1997 has been in business services, up by 16,400 jobs (6.5 percent). Professional services firms, including those operated by accountants and consultants, grew during this period by 4,900, a 4.9-percent gain. Investment firms added 4,200 jobs, a gain of 2.8 percent. Other growth sectors included the restaurant industry, health services, and social services. The manufacturing sector lost only 1,500 jobs, the smallest drop in more than two decades. Crain's New York Business estimates that New York City will gain 50,000 jobs in 1998, bolstered by continued strength on Wall Street and in business services and communications.

Employment in New Jersey increased by 67,200 jobs (1.2 percent) during the 12 months ending in November 1997. New Jersey's unemployment rate was 4.9 percent in November 1997, a significant decline from 6.1 percent the previous year.

Manhattan's commercial real estate market is very strong. In top midtown office buildings, vacancy rates are down to 3 percent. Overall the vacancy rate in Class A office buildings in midtown fell to 8.5 percent as of December 1997, down from almost 12 percent a year earlier. The average asking rents as of December 1997 had increased to $41 per square foot, from $39 a year earlier. After years in the doldrums, office leasing in downtown Manhattan has picked up considerably. This change has led to the cancellation of some plans to convert office buildings into residential use. For example Goldman, Sachs has agreed to lease all 522,089 square feet of space at 10 Hanover Square in the Wall Street area, a building that had been slated for conversion to rental housing.

Development of new office buildings has begun in Manhattan. Reuters, the British media company, is planning to construct a 32-story headquarters in Times Square with the aid of substantial tax concessions from the city. Nearing completion across the street from this site is the 48-story office tower for Conde Nast Publications, which will be the first office-tower completion in the 1990s. Office construction in the city's other four boroughs has been very limited because achievable rents do not support construction costs. Some office-building construction has taken place in the New Jersey suburbs and on Long Island. The vacancy rate for Class A buildings in Northern New Jersey is 9 percent and rents are averaging almost $30 per square foot, according to Insignia/Edward S. Gordon of New Jersey, Inc. In Westchester County, there is virtually no new construction of office space due to the soft market conditions resulting from corporate downsizing and consolidations.

Multifamily housing construction in New York City outside Manhattan has been virtually nonexistent in the 1990s because rents could not cover development costs. To overcome this obstacle, New York City has developed a loan program to spur development of much-needed middle-income housing. The city's Housing Development Corporation (HDC) has set aside $15 million to finance approximately 1,000 new, middle-income house units. With the issuance of long-term taxable bonds, HDC will offer developers direct long-term loans averaging $15,000 per unit at very low interest rates of 1 to 3 percent. The program has income limits for prospective tenants; the maximum eligible income for a family of four is $118,500, and the maximum rent for a three-bedroom unit will be $1,750. The city is also attempting to spur economic development in distressed neighborhoods under the Alliance for Neighborhood Commerce and Homeownership Program. Under this program $11 million in public financing has been set aside to provide incentives like construction loans, loan guarantees, and second mortgages to developers to build retail projects on empty sites leased from the city. The program is expected to generate 437,000 square feet of retail space during the next 5 years on several sites in such distressed minority neighborhoods as Bedford-Stuyvesant, Bushwick, Harlem, and the South Bronx.

According to the NATIONAL ASSOCIATION OF REALTORS^®, the number of existing homes sold statewide during 1997 (172,100) increased by 3.8 percent compared with 1996 volume. New Jersey reported a 6.4-percent increase in resales in 1997 compared with 1996.

Single-family homebuilding permit activity in New York State in 1997 remained fairly strong (19,800 units), down only 2 percent from the 1996 volume for the same period. Multifamily housing activity in 1997 totaled 13,191 units, a 16-percent decline from 1996 but still the second-best year since 1990. The New York City housing market continued to show strength; multifamily activity in 1997 (8,603 units) was virtually unchanged from 1996.

Single-family building activity in New Jersey totaled 23,011 units in 1997, a 9-percent increase over the same period in 1996 and the best year of the 1990s. Multifamily permit activity for 1997 also was up significantly to 4,443 units, a 29-percent gain.

Spotlight on Middlesex-Somerset-Hunterdon, New Jersey

The three-county metropolitan area spans central New Jersey from New York Harbor to the Delaware River. The metropolitan area is the third largest in the State, with an estimated population in 1996 of 1.1 million, a 1.3-percent annual growth rate since the 1990 census.

During the 12 months ending in November 1997, employment grew 5.1 percent, an increase of 29,500 new jobs. The unemployment rate for the period averaged 3.9 percent, the lowest for any metropolitan area in the State. Job gains were reported in all of the major sectors of the economy. Johnson & Johnson, based in New Brunswick, is the area's largest private employer. Construction of new shopping centers and major expansions of existing ones are anticipated within the next 2 years in Bridgewater, Carteret, Manville, Somerville, and Watchung. Construction employment is expected to be a stronger force in the economy in 1998 with the start of construction on three large distribution facilities in southern Middlesex county. The facilities will have a total of 3 million square feet of space. In addition, in Bridgewater in Somerset County, the first phase of 11/2 million square feet of office and commercial space in the Somerset Corporate Center has begun construction.

Several new developments are under construction or have recently been completed in downtown New Brunswick. Liberty Plaza, a 135,000-square-foot medical and retail complex, will be occupied by the University of Medicine and Dentistry of New Jersey. Two buildings with a combined total of 250,000 square feet have been leased by the city and county. A HUD-insured apartment with 120 units was recently completed on urban renewal land and is being rapidly absorbed. A second stage with both sales and rental housing is in preconstruction. A report from Cushman & Wakefield indicates that the office market has improved substantially, particularly in Class A spaces where the vacancy rate has fallen to 8 percent. During the past 12 months, the asking price for Class A space increased by 12 percent in Middlesex County to $25.64 per square foot.

Single-family homebuilding permit activity in 1997 was up 7 percent to 5,019 units, but multifamily housing units authorized by permits declined to 935 units after 2 strong years averaging 1,100 units each. Although it accounts for slightly more than 13 percent of the State's population, the metropolitan area has been responsible for almost one-fourth of the State's single-family activity and almost one-third of its multifamily activity since 1990.

The rental housing market is tight, with an overall vacancy rate of approximately 4 percent. Recent rent increases have been in the 3- to 5-percent range. Typical rents for two-bedroom apartments are about $800 for older units and $1,000 for modern garden apartments.

The sales housing market is balanced. Home sales for 1997 were up 7 percent over 1996 levels. According to the New Jersey State Board of REALTORS^®, the median sales prices in the metropolitan area were $248,000 in Somerset County, $240,000 in Hunterdon County, and $154,000 in Middlesex County.