The Southwest economy continued to grow at a healthy pace. The region added more than 402,000 jobs in the 12-month period ending in November, with the service and trade sectors representing more than 51 percent of the increase. The rate of wage and salary employment growth averaged 3 percent during the 12-month period ending in November, spurred by strong growth in Texas of 3.1 percent. Employment in Oklahoma during the 12-month period rose 2.7 percent, while Louisiana and Arkansas both experienced increases of 1.9 percent.

While petroleum-related businesses were battered by low oil prices, high-technology industries and the construction and service sectors showed continued strong growth. The construction sector has been a continuing bright spot for the Texas economy as low interest rates fueled a boom in both residential and nonresidential construction. Rental housing markets continue to absorb the high volumes of new units, as apartment occupancy rates increased in all major metropolitan areas in Texas. The sales housing markets throughout much of the region continued their high volume of construction and sales activity.

Oil producers are reeling from the effects of extremely low prices. Oklahoma oil production is less than half what it was in 1984, which has led to employee layoffs and reduced corporate profits. The number of rigs drilling for oil and gas in Oklahoma is at its lowest level in 26 years. Phillips Petroleum announced it will cut 1,400 jobs in 1999. Conoco, the largest employer in Ponca City, recently announced similar cuts. The Midland-Odessa, Texas, area and parts of Louisiana are also affected. As a result of decreased tax revenues, Oklahoma State agencies are facing a 3.6-percent budget cut for the remainder of the current fiscal year which ends June 30. The State of Texas' oil revenues are also declining, but because of the budget surplus, the impact has been minimal.

This was an exceptional year for homebuilding and sales in the Southwest region. Single-family permits for the year totaled 139,223 homes, a 20-percent increase over 1997. Texas led the region with the biggest gain (23 percent) and the greatest number of homes (99,109). Oklahoma and New Mexico also recorded double-digit increases in single-family permits for 1998. Through December, permits were issued for 31,940 homes in the Dallas-Fort Worth area, a 22-percent gain. Houston- Galveston-Brazoria production was also up 22 percent for the year. Single-family permits were up 26 percent in 1998 for both the Austin-San Marcos and the San Antonio metropolitan areas.

The annual rate of existing home sales in the Southwest region in 1998 increased by slightly less than 19 percent to 587,400 homes. All States recorded substantial gains in sales activity. Except for New Mexico, the other States recorded double-digit increases. Texas, as expected, led the region with the greatest increase (22 percent), and the highest volume (357,700) homes.

Based on data for sales in the first 10 months of 1998 from the Real Estate Center at Texas A&M University, sales in Dallas-Fort Worth were up 15 percent, Houston-Galveston-Brazoria sales were up 17 percent, Austin activity increased 23 percent, and San Antonio sales volume increased 14 percent.

Sales of existing single-family homes ended the year on a strong note in the Oklahoma City market area. The Oklahoma City Metropolitan Association of REALTORS^® reported 11,803 sales in 1998 at an average price of $96,480, a 1-percent increase in volume and a 6-percent increase in price over 1997. Both the Oklahoma City and Tulsa markets recorded their best year of the decade for building permits. Permits were issued for 6,448 units in the Oklahoma metropolitan area and for 5,590 units in the Tulsa metropolitan area.

Manufactured housing is a very important source of new home demand in the Southwest region. Shipments to States in the region in 1998 totaled 78,809 homes. Texas also continued to lead the Nation in manufactured housing shipments. New home shipments by manufacturers to locations in Texas totaled 45,277 units, a 22-percent increase over 1997 volume.

The trend in multifamily housing production in the Southwest was mixed in 1998. Arkansas, Louisiana, and New Mexico recorded substantial declines in multifamily building permit activity, while activity in Texas and Oklahoma for the year reflected the continued economic growth and strong demand for rental housing. During the year permits were issued for 55,692 units in Texas, a 28-percent increase over an exceptional 1997 and 80 percent of the activity in the entire region. Oklahoma also recorded a double-digit increase to 4,671 units. Activity in the Dallas-Fort Worth Metroplex was the most during the decade, totaling 22,338 units. The Houston-Galveston-Brazoria area recorded one of the largest increases in activity in the Nation for 1998; permits were issued for 21,792 units, an 89-percent increase over 1997. Activity in San Antonio fell 60 percent in 1998, after 4 years of multifamily construction averaging 2,500 units annually.

Spotlight on New Orleans, Louisiana

The population of the New Orleans metropolitan area increased from slightly more than 1,285,000 in 1990 to 1,308,000 in 1997, a 1.8-percent gain. However, the city of New Orleans has lost almost 6 percent of its population since 1990.

The metropolitan area's economy has been buffeted by the ups and downs of the oil and gaming industries. Nonagricultural wage and salary jobs increased by 58,700 from 1990 through 1997 for an 11-percent increase. Wage and salary employment was up only 1,200 (0.2 percent) in the 12 months ending in November 1998, as the oil industry has again gone into a recession.

Although the Asian recession hurt the area's oil service industry, the Port of New Orleans had a record-breaking year in 1998 for general cargo, due to heavy steel imports from Asia. Local experts predict that most of New Orleans' new jobs will come from government, health services, and business-related and other services. The outlook for the New Orleans economy over the next 2 years is for slow, steady growth.

A number of developments are under way in the city. The $95 million Jazzland regional theme park in East New Orleans is slated to open in May 2000, and Phase III of the New Orleans Convention Center will open early in 1999. In addition, the U.S. Department of Defense's (DoD's) Navy Computer Center is under construction at the Lakefront. This facility is scheduled to open during the first half of 1999 and will create approximately 1,500 high-technology jobs by 2000. The largest private employer in the New Orleans area is Avondale Industries, which relies heavily on Navy contracts. The shipyard currently employs 6,000 persons, and up to 4,000 new jobs are expected to be added during the next few years.

In 1998 new home construction in the New Orleans metropolitan area reached its highest level since 1979. Single-family permits totaled 3,896, a 4-percent increase over 1997. More than half of all new homes in the area are being built in suburban St. Tammany Parish. Existing home sales in the metropolitan area for 1998 totaled 10,256, an increase of 2.5 percent over 1997. The average sales price was $132,000, a 6-percent increase over 1997.

Multifamily housing activity in recent years has been primarily luxury rentals and assisted-living communities for seniors. A proposed 700-unit luxury apartment complex near the Warehouse District in New Orleans is in the final design stage. Construction of the first 279 units is slated to begin this year. The first phase of The Lake of Chateau, with 248 units, opened last month in Kenner, and the 248-unit second phase is under construction. Historic Restoration, Inc., has plans to convert the abandoned American Can Company plant near City Park to a 260-unit apartment development. However, the development will need city council approval for a loan to provide $6.5 million of the total $35 million development costs. Local rental market conditions in the New Orleans metropolitan area's suburbs are balanced. Local sources indicated an overall rental vacancy rate of about 7 percent in the metropolitan area and about 10 percent in the city, where the market remains soft.