During the first quarter of 2003 employment trends in the New York/New Jersey region continued to decline. Factors such as the national recession, the stock market decline, and the residual effects of September 11, 2001, all contributed to the sluggishness. The most recent Federal Reserve Board’s Beige Book indicates that economic conditions in New York and New Jersey generally weakened during the first quarter of 2003. Both consumer and business spending levels were down and short-term prospects for increased business/commercial investment in the region are poor. Despite the region’s soft labor market conditions, low mortgage interest rates continued to encourage refinancing and have resulted in relatively strong for-sale housing market conditions in both states.

As of February of 2003 the unemployment rate in New York State was 6.1 percent, up from 6.0 percent 1 year ago. The unemployment rate in New York City was 9.2 percent, up from 7.8 percent 1 year earlier. The unemployment rate in New Jersey was 5.7 percent.

Total nonfarm employment in New York State declined by approximately 122,000 jobs, or 1.4 percent, for the 12-month period ending February 2003. Most of the job losses were in service industries, primarily professional and business services, information technology, and financial activities. More than 50,000 jobs were lost in manufacturing, primarily in the durable goods sector. These losses were partly offset by increases in jobs in education, health services, and government.

New York City continues to affect statewide employment statistics. In the 12-month period ending February 2003 average annual nonfarm employment in New York City declined by 99,400 jobs, which was more than 80 percent of the total loss for the state. Job losses in the city’s financial sector continue, declining by an additional 16,100 jobs during the period. The leisure and hospitality sector registered a moderate increase and hotel occupancy levels were up slightly compared with 1 year ago.

Numerous major commercial construction projects in New York City were either canceled or delayed because of the economy’s downturn. Through February 2003 investment in nonresidential construction is estimated to have decreased by more than 50 percent from a year earlier.

Most Upstate New York metropolitan labor market areas sustained employment losses into the first quarter of 2003 as the manufacturing sector continued to contract. Previously announced bankruptcies at both Ames and Kmart department stores and soft consumer spending patterns also adversely affected the retail sector in some areas. During the 12-month period ending February 2003 the Rochester, Binghamton, Jamestown, and Elmira metropolitan areas all registered job losses, from 1.5 percent in Jamestown to 3.7 percent in the Binghamton area. Employment in the Buffalo-Niagara Falls, Albany-Schenectady-Troy, and Syracuse metropolitan areas remained essentially unchanged.

In the Buffalo-Niagara Falls metropolitan area General Motors Corporation recently announced a $300 million capital investment plan for the Tonawanda GM Powertrain Engine Plant to produce its new 3.5- and 3.9-liter V-6 engine lines. The improvements are expected to occur in early 2005 and result in the rehiring of 520 workers and the retention of an additional 200 employees.

In New Jersey total nonfarm employment declined by 5,800 jobs through February 2003, representing a 0.2-percent employment loss compared with 1 year ago. The large decline in manufacturing was partially offset by increased employment in education and health services.

Vacancy rates for commercial office space in both New York and New Jersey continued to increase during the first quarter of 2003. The New York Times recently reported that between March 2002 and March 2003 the office vacancy rate increased from 9.3 to 11.5 percent in Midtown Manhattan and from 11.9 to 13.3 percent in the downtown area. It was also reported that overall hotel occupancy rates in New York City increased from 65 to 71.8 percent between April 2002 and April 2003.

Through March 2003 total residential construction activity in the New York/New Jersey region totaled approximately 15,000 units. In the first quarter of 2003 single-family permit activity in this region declined 13 percent compared with the first quarter of 2002.

Demand for studio and one-bedroom condominium and co-op apartments in Manhattan remains strong because record low mortgage interest rates have increased the affordability of these units. In contrast sales of larger, more expensive units have declined. Overall conditions appear to have shifted from a soft market to a more balanced market.

The New Jersey Association of REALTORS^® reports that the median sales price of an existing single-family home increased 9.3 percent between 2001 and 2002. In 2002 total sales volume in the state increased by 8,500 units, or 6.4 percent. Despite decreased economic activity home sales in most Upstate New York market areas have remained surprisingly strong.