The September 11th attack
An economy in question

By John Duchemin
Advertiser Staff Writer

Last week in Waikiki, the Sept. 11 terrorist attacks made themselves felt. Hotels have been empty, the beach has been empty, Kalakaua Avenue has been desolate and no one knows when the visitors will come back.

With visitor traffic at a virtual standstill last week, Pongi Tevaga had plenty of free time on his hands at the city-run information booth in Waikiki where he works. He spent his day helping 20 to 30 people and reading "The Celestine Prophecy." Richard Ambo • The Honolulu Advertiser

"This is scary, the worst I've ever seen," Santiago said. "I'm a single parent and I worry about my job. My working time has been cut back by six hours, so I'll be taking home less money. I'm just afraid that this is going to get worse before it gets better."

Santiago's worry is understandable. Hawai'i is in a very uncertain situation. No data yet show that the shock to tourism from the terrorist attacks will translate into a protracted economic decline, but nothing is indicating the situation will end tomorrow. All anyone has to go on is a cloud of bad short-term news, a tense geopolitical situation and a few reasons for hope, such as interest rates dropping and Congress' approving $15 billion in aid for airlines.

This environment has bred predictions that may be compelling but lack the weight of evidence. Some say the state's economy is in a crisis; others say it's not yet there.

Some say everything will be back to normal in a matter of weeks or months; but some think nothing will ever be the same, especially if the current hardships drive lots of tourism companies out of business.

The important numbers that will allow analysis and forecast are still unknown. And it still isn't known what will happen to the world.

The keys to the situation — what will result from this war on terrorism, and how will the economy respond? — are out of Hawai'i's hands.

As much as the government tries to help the local business climate and alleviate the suffering of laid-off workers, Hawai'i cannot recover, or even predict a recovery, until more people start to fly again and lift the tourism industry, economists say.

And that will likely depend more on what the world does — recession or expansion, war or diplomacy — than on what Hawai'i does.

Gov. Ben Cayetano has called for quick action to keep the economy from sliding into recession. Many praised his initiative but said his proposals were premature and a bit off the mark. Cory Lum • The Honolulu Advertiser

The unsureness has infected the business and consumer climate in Hawai'i, creating a range of reactions to the lack of information.

Aloha Airlines, for instance, responded to a sudden dearth of passengers by cutting 26 percent of their flights, starting tomorrow, and furloughing 250 workers.

Dan Pilurs, owner of Coconut Cruisers, is considering selling his entire fleet of 16 Harleys, which he rents to tourists from a stand on Kalakaua Avenue, and going back to bicycles.

"I don't feel good about this at all," said Pilurs, 53. "Break-even for me is about eight or nine hundred dollars a day. Yesterday (Wednesday) I did ninety dollars."

Resort retailer McInerny is trying to endure without letting people go, said Chip Ching, manager of the local chain's Waikiki anchor store, where none of the 45 employees have been laid off so far.

"We were impacted by Hurricane Iniki and the Gulf War, but nothing like this," said Ching, 52. "Our president (Michael Windsor) has talked to our employees about working together and trying to tough this out. I think we'll look at this for three or four months. A lot of people who work in Waikiki understand the situation and know it can't be helped."

Many are watching for signs of lagging confidence. For now, information is largely anecdotal. Home buying, for example, has slowed down after a good summer, said Jon Whittington, Hawai'i manager for Countrywide Home Loans. New homes are usually considered a discretionary buy — as in, they're nice but not necessary — and are often one of the first things consumers cross off their list in bad times.

"We're not seeing a lot of people canceling their contracts, but there's been a bit of reluctance to go into new deals," Whittington said.

Others aren't drawing any conclusions, not knowing whether to expect a quick recovery or prepare to seek new work.

"I'm not sure it's a crisis yet," said Al Arocha, 31, front-desk clerk at the Outrigger Waikiki On the Beach, "but there's a lot of uncertainty. I think most people are in a wait-and-see mode."

The state government decided not to wait and see. Gov. Ben Cayetano on Wednesday said the state is confronting "the most serious challenge that we have ever faced" — a conclusion reached amid airline layoffs and reservation cutbacks. He announced a set of proposals to help businesses and workers, including benefits for laid-off employees, tax cuts, elimination of airport landing fees and a proposal to increase spending.

The proposals got mixed reviews. Some were happy to see the state government taking charge in a time of crisis. Several economists, however, said some of the governor's proposals are good, but others are premature and off the mark.

For example, the proposed extension of unemployment benefits is good, in that it could help jobless workers through a very real short-term crisis — but additional business tax incentives do nothing to help the immediate situation, Grandy said. And the proposed postponement of income tax cuts, while increasing government money now, would only hurt in the long run, Grandy said.

"We have very little data, and what we have, we have no idea whether it will even be relevant next week," Grandy said. "Throwing a bunch of stuff out there and hoping something will work is a great way to convince people that you're doing something and waste a lot of money at the same time."

Grandy advises patience — hold off on rash action until the state has a better grasp of what has happened to its visitor count.

Economists say all eyes should be on visitor numbers for September and October, which could give the best indication of how much the economy has really been hurt.

Until then, people have to get by with gut instinct.

"I tell you what — if it doesn't change as we head toward the holidays, then it's going to be hard," said "Uncle Gil," a Pacific Beach Services vendor in Waikiki. "If Christmas comes and we're still slow, we're going to be in big trouble."

Advertiser staff writer Rod Ohira contributed to this article.