State's 1990s growth rate worst in nation

By Glenn Scott
Advertiser Staff Writer

Even though Hawai'i was starting to emerge from its economic doldrums by the end of the 1990s, the Commerce Department said yesterday the state ended up with the worst growth rate in the nation for most of the past decade.

Although Waikiki suffered in the 1990s, Hawai'i's growth rate is expected to top the national average this year. Advertiser library photo • March 14, 2001

But that was not the case in Hawai'i's difficult 1990s. In an annual report issued yesterday, the department's Bureau of Economic Analysis said 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.

Hawai'i was the only state to record an overall decline, according to bureau figures, with a 0.3 percent drop.

The bureau's economic study focused on gross state product from 1992 through 1999. It chose 1992 as the first year the national economy was starting to recover from the 1990-91 recession. But, as Island economists have long 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 Island real estate prices to fall, construction to cease and jobs to disappear.

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

Not as bad as they say

Nevada's booming economy meant some rooms at Bellagio Casino Resort in Las Vegas went for $2,000 on New Year's Eve 1999. Advertiser library photo • March 30, 2000

However, Byron Gangnes, a University of Hawai'i economics professor, 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, but not the same year-on-year declines of the bureau's gross state product study.

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

Gangnes said the bureau's study comes out so long after the fact that the question of an extended recession doesn't matter except as an historical issue.

"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 increase in the state product of 0.65 percent during the same period.

The federal bureau calculated growth based on a national average for inflation, she said, while the state used Hawai'i's lower inflation rate, which was less than the national average because of the slow real estate market. Booming states such as Nevada, in turn, probably 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."

Most state economies grew

For many states, the 1990s weren't bad at all. The decade is known in most of the United States as being the time of the longest U.S. cycle of economic expansion. According to the bureau, Arizona led all states with an average growth rate of 7.3 percent. Nevada, a 1990s refuge for migrating Island residents, 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, and Nevada tallied 13.8 percent annual rate in construction.

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

As for growth rates this year, Imada Iboshi's office is forecasting a 2.8 percent growth rate this year for Hawai'i.

That's about a percentage point stronger than most 2001 estimates for the slowing gross domestic product.