honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted at 12:20 p.m., Tuesday, June 5, 2001

Hawai'i economy catching up

By Glenn Scott
Advertiser Staff Writer

Hawai'i, which had the worst economic performance of any state for most of the last decade, is on track to top the average U.S. growth rate this year.

As the U.S. economy has slowed this year after a record expansion, Hawai'i's economy has sustained its new energy on the strength of increases during the past year in construction, jobs and personal income.

The state Department of Business, Economic Development & Tourism is forecasting a 2.8 percent growth rate for the Islands this year. That's about a percentage point higher than most estimates for growth in the gross national product.

All that represents a turnaround from Hawai'i's weak economic performance in the 1990s.

In a summation of those times, the Commerce Department's Bureau of Economic Analysis issued a report yesterday saying Arizona and Nevada led the country in growth, with average rates topping 7 percent from surging activity in construction, high-tech manufacturing and wholesale trade.

The bureau found Hawai'i was the only state to record a decline, of 0.3 percent.

The picture has improved so far this decade. A measure of consumer spending, Telecheck Retail Index, released today compares retail spending by personal check from one year to the next. It showed Hawai'i leading the nation, with 5.2 percent growth in dollar volume over May 2000. The national average for May was 2.8 percent.

The Telecheck Retail Index finding of a rise in Island consumer activity over the past year confirms the Commerce Department's findings that the state economy remained sluggish in the 1990s long after most other states were experiencing robust growth.

The bureau's economic study focused on gross state product from 1992 through 1999, beginning with the first year the national economy was starting to recover from the 1990-91 recession.

As Island economists have noted, Hawai'i was just then easing into a period of hard times in response to the collapse of Japan's inflated "bubble economy," which prompted a drop in real estate prices, halt to construction and loss of jobs.

The bureau report says Hawai'i construction fell 7.9 percent for the period, and manufacturing — which includes food products — dropped 4.3 percent. The bureau found that real gross state product actually fell in four of the seven years.

The measure of gross state product measures the estimated market value of goods and services produced in the state. Generally the bureau's numbers suggest that Hawai'i didn't escape recession until perhaps 1996.

However, University of Hawai'i economics professor Byron Gang-

es cautioned that economists weigh several kinds of data in charting a state's economic performance. He said his colleagues with the university's Economic Research Organization prefer to use measures of personal income, which showed flat economic activity during several years in the 1990s rather than the year-on-year declines of the bureau's gross state product study.

Personal income figures show more buoyancy in the state's economy starting in 1997, when Gangnes said economic recovery actually began.

He said the bureau's study comes out so long after the fact that the question of an extended recession no longer matters except historically.

"By any of these measures," he said, "Hawai'i had a much longer and more drawn-out economic slump than any other national market."

Pearl Imada Iboshi, research director for the state Department of Business, Economic Development & Tourism, said state calculations show a slight, 0.65 percent increase in the state product during the period studied.

The federal bureau calculated growth based on a national average for inflation, she said, while the state used Hawai'i's lower inflation rate, dragged down by the slow real estate market. Booming states such as Nevada, for example, generally had higher-than-average inflation rates.

"It wasn't great for Hawai'i," she said, "but it wasn't really as bad as they say."

For many states the 1990s weren't bad at all. The decade is known in most of the United States as the longest cycle yet of U.S. economic expansion. According to the bureau, Arizona led the nation with an average growth rate of 7.3 percent. Nevada, a refuge for migrating Island residents in the 1990s, followed with a 7 percent mark.

For the period, Arizona had a 13.2 percent average annual growth rate in manufacturing, much of it in high-tech industries, while Nevada tallied a 13.8 percent annual rate in construction.

Among the worst economies during the period, the study found Alaska's growth rate was 0.5 percent. West Virginia came next at 2.4 percent.

• • •

HOW THE STATES FARED IN THE '90S
Average annual percent change in real gross state product, 1992-1999:
Top Five
State Growth (in percent) Rank
Arizona 7.3 1
Nevada 7.0 2
Oregon 6.8 3
Colorado 6.6 4
Idaho 6.6 5
Bottom Five
Wyoming 2.5 47
West Virginia 2.4 48
Alaska 0.5 49
District of Columbia 0.3
Hawai'i -0.3 50