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The Honolulu Advertiser
Posted on: Tuesday, September 25, 2001

The September 11th attack
State could lose up to 24,000 jobs, economists say

 •  Governor seeks $1 billion building boost for economy
 •  Business leaders preparing tourism marketing plan
 •  Classic Vacation cutting 220 jobs

By Michele Kayal and John Duchemin
Advertiser Staff Writers

The first data compiled on the potential economic effects of the Sept. 11 terrorist attacks are undeniably grim for Hawai'i.

State economists estimate that depending on the severity of the downturn through December, Hawai'i could lose anywhere from 5 to 10 percent of its total visitor arrivals for 2001, $492 million to $1.3 billion in gross state product and as many as 24,000 jobs.

And while it remains uncertain how deep or enduring the tourism slump will be — a return to normal still could be quick — the slowdown could slice a full percentage point off the state's economic growth this year, according to two University of Hawai'i economics professors.

In some of the earliest numbers available since the attacks, state airport passenger counts show international travel down 78 percent on Sept. 15 compared to the same date last year, and domestic travel off 30 percent on Sept. 19, according to professors Carl Bonham and Byron Gangnes.

Bonham and Gangnes, with the University of Hawai'i Economic Research Organization, noted that with such declines Hawai'i could see visitor numbers fall 15 percent in the third quarter, which ends Friday.

Bonham and Gangnes had previously predicted 2.5 percent growth for the state, but now say that could stall to 1.5 percent if tourist arrivals continue to drop, hotels remain empty, airlines cut flights and local businesses close.

Last week, nearly 3,400 Hawai'i residents applied for unemployment benefits — more than twice the average of 1,400, the state Department of Labor and Industrial Relations said yesterday. About 80 percent of the claims were for partial benefits, people who have been furloughed or had their hours cut, said department spokesman Tom Jackson. Jackson said 80 percent of the claims were tourism-related.

The crisis last week prompted Gov. Ben Cayetano to order the Legislature back into session next month and to develop plans to help struggling businesses and workers, including benefits for laid-off employees, tax cuts, elimination of airport landing fees and a proposal to increase public works spending.

While it is still too soon to determine the exact impact the slowdown will have on Hawai'i, state economists have developed several scenarios.

They note that during the last significant tourism slump in Hawai'i — the first quarter of 1991, when the Gulf War was at its peak — arrivals declined by 13 percent.

A 13 percent decline in arrivals from September to the end of 2001 compared to the same period last year would result in a $492 million to $650 million blow to the economy, according to figures from the Department of Business, Economic Development and Tourism.

It would also result in an overall 5 percent decline in arrivals for the year, costing businesses about 2,000 jobs, they estimate.

If visitor traffic drops 20 percent between now and the end of December compared to the same period last year, state economists said, it will result in a 7 percent drop in arrivals for the year, and will cost Hawai'i between $700 million and $910 million. About 16,000 jobs would be lost.

A 27 percent drop in arrivals through the end of the year would mean a 10 percent drop for 2001, accompanied by a $980 million to $1.3 billion blow to the economy, and a loss of 24,000 jobs.

But economists said they consider the most dramatic scenario unlikely.

"That's more than twice the rate of decline as compared to the Gulf War," said department head and top economist Seiji Naya. "Probably it's going to be more than the Gulf War, but it's not going to be twice as much."

Bonham and Gangnes also note that their report is not a forecast because statistics are so preliminary. That early data may not allow accurate predictions, they cautioned. For example, passenger numbers — grim as they are — may be padded by Hawai'i residents rushing home after three days stranded abroad.

On the other hand, many vacationers have postponed rather than canceled their trips and an improvement in the latter part of September would mean the report may be too pessimistic, they said.

"It is our opinion that insufficient hard evidence is available at present to make a reliable forecast," the professors said in the report. "We are quite simply in uncharted territory. ... It is unclear to what extent this downturn will extend beyond the very immediate future, so that the medium-term impact cannot be clearly assessed at present."