Posted on: Wednesday, December 22, 2004

2004 good to state economy

By Sean Hao
Advertiser Staff Writer

Hawai'i's economy is poised to end 2004 on a high note with just-released economic indicators showing solid job and income growth, low unemployment and a declining bankruptcy rate.

Personal income statewide rose 6.2 percent during the third quarter compared with the same period last year, putting Hawai'i in the top 10 among the 50 states, according to figures released yesterday by the Bureau of Economic Analysis. Separately, the state labor department reported that November's jobless rate remained level at a seasonally-adjusted 3.3 percent — the third lowest rate nationwide.

The combination of rising income, low unemployment and a generally robust economy has helped drive down bankruptcy filings by 14 percent as of Monday, compared with all of last year, according to local economists.

Such rosy figures solidify expectations that Hawai'i's economy should remain strong for the foreseeable future.

"All of the economic indicators are telling the same positive story about the local economy," said Byron Gangnes, a University of Hawai'i associate professor of economics.

Hawai'i's economy has benefited from strong tourism, real estate and construction. However, a byproduct of that growth is rising inflation, which remains a key concern entering next year. Consumer prices in Honolulu were 3.3 percent higher through the first six months of 2004, compared with the same period a year earlier, and one estimate is that inflation next year will rise to 4 percent.

When inflation and income growth from new jobs are backed out of the numbers, the typical Hawai'i worker is seeing his or her purchasing power grow a respectable 1 percent this year, Gangnes said.

However, increases in living costs, the potential for higher interest rates and a tight labor market heading into 2005 means the economy may not have much more room for improvement.

"This is as good as it gets," said Paul Brewbaker, chief economist for Bank of Hawaii. "We're in the zone."

In addition to the risk of higher inflation, a tight labor market resulting from relatively low unemployment also may constrain future economic growth, Brewbaker said. Importing workers from outside the state remains an option, although high housing costs may make that unfeasible for some, he added.

Kyle Honda, 39, who grew up on Maui but moved to Seattle years ago in search of better opportunities, is considering moving back.

"Wow, look at the Hawai'i economy," Honda said. "Here in Seattle, it ain't happening. Our unemployment rate is 8 percent."

Hawai'i has been adding jobs steadily. Last month there were 17,400 more people employed statewide than in November 2003. That's a 2.9 percent increase, according to the state Department of Labor and Industrial Relations. Year-to-year the number of unemployed dipped 6,000 to 21,600 people.

In November there were more leisure and hospitality jobs as well as education and health services positions than the previous month, while the number of jobs in trade, transportation and the utilities sectors dipped.

Additionally, November's seasonally adjusted jobless rate of 3.3 percent statewide remained well below the November 2003 rate of 4.4 percent. The seasonal adjustment attempts to smooth distortions caused by holidays and other recurring events.

On a nonseasonally adjusted basis, the Big Island's jobless rate in November fell to 4.8 percent from 5.9 percent a year earlier. Honolulu's rate fell to .1 percent, compared with 4.1 percent a year ago. Maui County recorded 3.3 percent, down from 4.7 percent a year earlier. Kaua'i's rate fell to 4.5 percent from 4.7 percent a year ago.

Among the local companies helping to fuel job and income growth is Oils of Aloha in Waialua, which this year added four jobs and increased wages, according to chairman Dana Gray.

"We've had a good year, and we anticipate having a good year in 2005," he said.

Still, the kukui and macadamia nut oil exporter is feeling the bite of higher material, healthcare and shipping costs.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.