The Washington area's unemployment rate remained at a tight 2.6 percent in September, well below the nation's 4.1 percent rate in that month and more than a full percentage point under the jobless rate for the region in September 1997, according to the latest employment survey numbers.

Jobs remain plentiful, but the shortage of workers is crimping businesses -- job growth in the region over the year that ended in September was the lowest in 18 months.

September's lowest unemployment rates appeared in the customary suburban growth regions. Loudoun County residents led the way with a microscopic 1.5 percent jobless rate, followed by Arlington, Montgomery, Fairfax and Howard counties, all under 2 percent. But the award for lowering residential unemployment during the 1990s belongs to a different group of communities in the region -- the older, established cities of Hagerstown, Annapolis, Alexandria and Frederick.

All of these cities were severely hit by the 1990-91 recession, which spread from real estate and banking to small retail shops and huge defense contractors.

These cities appeared to be more vulnerable to the recession than their surrounding counties, perhaps because of their concentration of smaller businesses and at-risk workers.

But all have bounced back dramatically.

Hagerstown, in western Maryland, for instance, was a poster child for economic decline a decade ago. A huge Fairchild aircraft plant had closed. A Mack Truck factory slashed its payroll from a peak of 3,000 jobs in the late 1980s to fewer than 1,000 after the recession, and many other businesses shared the pain.

Unemployment rates in Hagerstown and surrounding Washington County topped 10 percent at several points during the early 1990s.

By September 1999, however, Hagerstown's jobless rate was down to 2.8 percent and Washington County's had dropped to 2.7 percent. Both are all-time lows.

"In anybody's memory, this is the hottest time for Washington County that's ever been seen," said Tom Riford, marketing director of the Hagerstown-Washington County Economic Development Commission.

Today, the area is capitalizing on its location at the crossroads of Interstates 81 and 70, its supply of affordable land for home builders and expanding businesses and a supply of potential workers in three states within 35 minutes driving time of the city, Riford says.

It's the same in Annapolis and surrounding areas, says Bill Baxter, president of the Anne Arundel Economic Development Corp. Pentagon downsizing after the Cold War's end hammered the county's large defense industry, creating some 600,000 square feet of vacant office around Baltimore-Washington International Airport alone, Baxter says.

But it was a blessing in disguise, as those empty spaces filled up with technology and telecommunications firms.

Annapolis's unemployment rate hit 10.6 percent in 1992. In September, it dropped to 4.8 percent. Anne Arundel County's rate had climbed over 6 percent seven years ago. At last reading, in September, it was 2.8 percent, the lowest level for that month in a decade.

Comparing Unemployment

The jobless rate has shrunk most dramatically in areas outside the immediate metropolitan D.C. area.

Unemployment rates in the Washington region 1999 and change from 1992, January to September average

Percent

Area Rate Change

Hagerstown 3.8 -6.0

Annapolis 5.3 -4.6

Alexandria 2.2 -4.4

Frederick City 2.9 -3.9

Baltimore City 7.4 -3.7

St. Mary's County 3.3 -3.4

Frederick County 2.4 -3.3

Baltimore County 3.9 -3.2

Loudoun County 1.2 -3.1

Arlington County 1.6 -3.0

Calvert County 2.9 -2.9

Charles County 2.8 -2.9

Anne Arundel County3.0 -2.7

Metro Washington 2.7 -2.7

Fairfax County 1.6 -2.4

Howard County 2.0 -2.3

Gaithersburg 2.4 -2.1

Prince George's County3.7 -2.0

Rockville 2.3 -2.0

District of Columbia6.8 -1.8

Montgomery County 1.9 -1.7

source: Bureau of Labor Statistics