Nonagricultural employment in the Northwest as of the fourth quarter of 1997 had grown by 134,900 jobs. This was 2.9 percent above the fourth quarter of 1996, although a slower rate than the 3.2-percent growth of the previous 12-month period. Washington continued to lead the region with a 3.7-percent annual growth rate, followed by Oregon with 2.9 percent. Job gains were up modestly in Alaska (0.7 percent) while remaining flat in Idaho. The region's labor market grew tighter; the regional unemployment rate as of the fourth quarter of 1997 was 5.2 percent, compared with 5.8 percent during the same period in 1996. Metropolitan areas with the lowest unemployment rates were Seattle (3.0 percent), Boise (3.4 percent), and Portland (3.8 percent). The outlook for the Northwest economy remains optimistic; however, the economic contraction in Asia could dampen the continued expansion. According to a recent study released by the Economic Policy Institute, job losses due to the Asian crises could reach 13,000 in Oregon alone.

Single-family home permit activity in the Northwest region totaled 56,372 units during 1997 -- a 1-percent drop compared with the same period in 1996. Activity in Washington was down by less than 1 percent, but activity in Seattle was up by 12 percent. In Oregon, single-family permit activity was off by only 4 percent from a very strong 1996 volume. The number of existing homes sold in Oregon in 1997 was also up almost 4 percent to 62,900 homes. Two consecutive years of double-digit appreciation in the State's major metropolitan areas in 1995 and 1996 made affordability a front-burner issue. However, house price appreciation began to slow in recent months as the inventory of existing homes for sale increased. The median sales price of a home sold in the Portland area in 1997 was up 7.7 percent (to $152,400) compared with a 10.2-percent increase in 1996. With more moderate increases in sales prices, a continued strong economy, and low mortgage interest rates, 1998 is expected to be another strong year for the sales housing markets of Oregon's metropolitan areas.

Multifamily housing permit activity during 1997 in the Northwest region increased by 6 percent over 1996 to 26,316 units. All States were up except Alaska, which declined by 17 percent. Strong apartment construction activity in Eugene, Salem, and Portland during 1997 should take some of the pressure off of these currently tight markets in 1998. The Boise rental market recovered from the overbuilding of the mid-1990s, and the rental housing vacancy rate was down to approximately 6 percent. The Boise market should be able to absorb the small number of units expected to be completed in 1998.

Spotlight on Central Puget Sound, Washington

The Central Puget Sound (CPS) region consists of the Seattle-Everett, Tacoma, and Bremerton metropolitan areas. The economy is booming in the Seattle-Everett and Tacoma areas, but it is stagnant in the Bremerton area. Continued significant declines in employment at the Puget Sound Naval Shipyard in recent years continues to impact the Bremerton area. In the other two metropolitan areas, the engines of employment growth are the aircraft manufacturing, computer development, high-technology, and construction industries. According to the Puget Sound Forecaster, CPS employment expanded by 3.1 percent in 1996 and 4.7 percent in 1997. It is forecast that employment will increase annually by 3.6 percent in 1998 and by 2.6 percent in 1999.

The unemployment rate for the region was 3.8 percent in 1997, the lowest rate since 1990. Labor shortages moved beyond the computer technology, administrative, and accounting fields to the skilled construction trades. In the city of Seattle alone, the total value of residential and commercial projects that were issued building permits in 1997 may exceed a record $1 billion, the highest since the 1987 level of $989 million.

The strong economy stimulated population growth. Between 1990 and 1997, the CPS region's population rose 13 percent to 3.1 million people, which put pressure on the housing market, especially in the Seattle area. Housing remains relatively affordable in the Tacoma and Bremerton areas. Seattle is a hot real estate market. Many local firms are reporting difficulty attracting prospective employees to the area due to the housing prices, and sales prices are expected to rise by nearly 7 percent over the next 12 months. The median sales price in 1997 for an existing home in the Seattle metropolitan area was $171,300.

Single-family permit activity for the CPS region totaled 16,935 units in 1997 -- a 6-percent increase from 1996. Since 1993, single-family home construction has been fairly stable in the CPS region, averaging approximately 16,500 units annually. The Seattle-Everett's proportion of single-family construction for the CPS area, however, declined from 72 percent of all new homes in 1990 to 60 percent in 1997. The decline reflects the reduced supply of buildable land, more restrictive zoning, and strong resistance to high-density development.

New and existing single-family homes sold in the CPS region through the Northwest Multiple Listing Service totaled 46,771 units in 1997 -- a 15-percent increase from 1996. Home sales were up in Tacoma and Seattle but were down in Bremerton. The median sales price for homes in the CPS area in December 1997 was $159,000, up nearly 7 percent from 1996.

Multifamily housing activity in the CPS area increased significantly during the past 2 years. During 1996 and 1997, permits were issued for approximately 8,600 multifamily units annually, compared with 6,300 units annually during the prior 4 years. This level is still well below historic highs from 1986 through 1991, when multifamily permits averaged nearly 13,000 units per year. According to the Dupre+Scott Apartment Vacancy Report for September 1997, the apartment vacancy rate was 6.8 percent in Tacoma and 9.6 percent in Bremerton, compared with the very low 2.6-percent rate in the Seattle area. Moderately priced apartments are scarce in Seattle, and rents have increased at a faster rate than in the rest of the CPS area.