Feds rank Hawai'i 35th in fostering 'new economy'

Advertiser Staff and Wire Services

Hawai'i ranked ninth from the bottom on the list of fastest-growing economies among the 50 states in 2000, the U.S. Commerce Department said yesterday.

But a Hawai'i economist said the federal government's ranking is inaccurate and misleading.

Hawai'i's gross state product, a broad measure of economic activity, grew 1.9 percent in 2000 when adjusted for inflation, better only than eight states, the department's Bureau of Economic Analysis said.

The top four states each grew more than 8 percent that year.

The ranking uses 2-year-old data and doesn't reflect current trends, said Paul Brewbaker, chief economist at Bank of Hawaii. He said a better measure would be fourth-quarter 2001 income data, which shows Hawai'i's 1.0 percent inflation-adjusted growth outpacing a slight national decline of 0.2 percent.

"If you want a comparison of states to be useful, you have to use the most timely and appropriate data possible," Brewbaker said. "The Commerce Department wrote the wrong news release because it's looking at 2-year-old data."

Also, Hawai'i's gross state product, and its ranking, would be higher if the Commerce Department had used the relatively low 1.7 percent local inflation rate to adjust the state product, Brewbaker said. Instead the department used the 2.6 percent national inflation rate to discount Hawai'i output from the unadjusted growth rate of 4.6 percent.

The Commerce Department report on gross state product showed the 10-year economic boom was showering prosperity from coast to coast in 2000. But pockets of weakness reflected hard times in the oil and gas industry and manufacturing.

Residents of Rhode Island enjoyed the fastest pace of growth, with a gain of 10.7 percent in gross state product in 2000 compared with 1999. Idaho had an increase of 8.3 percent, and Oregon showed a 8.1 percent rise.

At the other end of the spectrum, Alaska, Louisiana and Mississippi were hurt by weakness in the oil and gas industry and manufacturing. Economic output in Alaska fell by 2.9 percent in 2000 and was down 2.7 percent in Louisiana, the only two states where the economy shrank that year. Mississippi, third from the bottom, eked out a tiny 0.8 percent increase.

After Alaska, Louisiana and Mississippi, the states with the weakest economic performance in 2000 were Delaware, up 0.9 percent; Wyoming, 1.2 percent; Alabama, 1.2 percent; West Virginia, 1.3 percent; Arkansas, 1.7 percent; Hawai'i, 1.9 percent; and Oklahoma, 2.0 percent.

The performance in the various states compared with a nationwide increase of gross state product of 4.5 percent in 2000. That performance compared with an increase in the gross domestic product, the benchmark for the entire economy, of 4.1 percent for 2000.

The GDP and GSP figures are not directly comparable because the government subtracts some components from the state-by-state figures that are included in the overall GDP numbers. For instance, the gross state product excludes compensation paid for federal employees and members of the military stationed overseas.

The Commerce report showed that after Rhode Island, Idaho and Oregon, the states with the best growth performance in 2000 were New Hampshire, up 7.8 percent; California, 7.3 percent; Colorado, 7.3 percent; Massachusetts, 7.1 percent; New Jersey, 6.6 percent; Arizona, 6.5 percent; and New York, 6.1 percent.

All together the top 10 growth states accounted for more than half of U.S. economic growth in 2000.

The top-performing states in the West — Idaho, Oregon, California and Arizona — all enjoyed robust gains in high-tech manufacturing industries.