July 5, 2022

Finance & Economy

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Hawaii’s economy is expected to resume recovery in November

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Thanksgiving could be a time to be extra thankful this year in Hawaii.

According to a new report by University of Hawaii economists, the Nov. 25
holiday is likely to be around when the main driver of the local economy — tourism — starts to make a significant recovery after a big tumble tied to the towering delta wave of COVID-19.

The University of Hawaii Economic Research Organization forecasts in a report released for publication today that such a pickup in tourism should lead a broader rebound for the state economy resuming late in the year after an
interruption by coronavirus mitigation measures enacted in August and slated to last at least into next month.

UHERO’s report recognizes a downward trend of coronavirus infection and hospitalization counts following recent peaks but notes that much uncertainty remains and could lead to a different result for Hawaii’s economy.

“The future path for the economy remains very uncertain, with risks tilted to the downside,” the report said.

Carl Bonham, UHERO’s executive director, said impacts from the latest wave of COVID-19 cases basically paused a local economic rebound that was looking pretty bright just a few months ago.

Bonham also said that this pause, while relatively brief, has been costly for residents who have lost work, business owners and others.

“It’s not a small disruption,” he said.

In its report, UHERO pro­jects that the statewide unemployment rate for the whole year will be 8.3%, which is a full percentage point higher than what UHERO anticipated in a previous report published in May.

UHERO also forecasts that Hawaii’s unemployment rate next year will be 6.8%, or two percentage points higher than the 4.8% it projected in its May report.

Personal income adjusted for inflation is expected to dip 1.1% this year and 4.9% next year largely because of reduced unemployment benefits.

In terms of the broadest measure of the economy, the value of all goods and services adjusted for inflation and known as real gross domestic product, UHERO expects this will rise by 3.5% to $93 billion this year largely on gains earlier in the year. In May, UHERO expected GDP would rise by 4% to $93.4 billion.

UHERO’s forecast for GDP growth this year is more optimistic than a forecast in August from the state Department of Business, Economic Development and Tourism when coronavirus case counts were still spiking. The agency forecast 2.7% growth, which represented a downward revision from 3.5% it projected in a May report.

Hawaii’s GDP next year is forecast by UHERO to hit $95.2 billion instead of a previously anticipated $96.3 billion.

A full recovery for Hawaii’s economy is expected in 2023 when GDP surpasses its 2019 inflation-adjusted total of $97.2 billion, according to the new and previous UHERO forecast reports.

For Hawaii’s visitor industry, UHERO expects that pent-up demand from mainland visitors will produce a very good holiday season this year, with strength continuing into 2022, when a significant contribution from international travelers is expected as well.

Last month Gov. David Ige in part triggered a falloff from what had been a rec­ord number of domestic visitor arrivals in July when he publicly urged visitors to delay trips to Hawaii through the end of October.

Some emergency county regulations also have been imposed to reduce group sizes and, in some cases, require proof of vaccination to dine in restaurants or patronize other businesses, including museums and theaters.

UHERO projects that visitor arrivals will end this year at 6.6 million, up from 2.7 million last year, and then continue rising to
8.6 million next year,
9.3 million in 2023 and
9.7 million in 2024. The record was 10.4 million in 2019.

“Additional increments to tourism recovery will be slower as we move beyond this year and next, reflecting still-struggling overseas markets, economic hardship for some U.S. families — particularly now that many federal support programs have been phased out — and the loss of some tourism infrastructure due to small-business failures and barriers to the reentry of transient vacation rentals,” the report said.

Hawaii’s economy is expected to resume recovery in November