Posted on: Wednesday, March 2, 2005

Hawai'i's economy looking good for '05

By Sean Hao
Advertiser Staff Writer

Hawai'i's vibrant economic growth — with more visitors, more jobs and higher prices — should continue this year, albeit at a slightly slower pace than last year, state economists predicted yesterday.

Gross state product, the value of all goods and services sold and the broadest measure of economic activity, will increase by 3.1 percent this year, after growing by an estimated 3.2 percent last year, according to the latest Department of Business, Economic Development and Tourism report on the economy.

A record 7.2 million tourists will visit the Islands this year, contributing to the creation of 10,600 jobs, the report said.

The growth is good news for job seekers and business owners but can bring with it an increase in housing and rental prices that few would welcome.

"Our biggest challenge is the cost of renting a place," said Sharon Kobayashi, a partner at Latitude 22, a maker and caterer of healthy and upscale foods. The company is looking to move out of a Culinary Business Incubator on 'Umi Street in Kalihi.

"It used to be that you could get a place in Kalihi or 'Aiea at a reasonable rate," said Kobayashi, who is also dealing with rising wages. "We pay pretty good, but it's still hard to find people wanting to do that work — baking."

During 2004, Hawai'i's strong construction, real-estate and tourism sectors helped generate job growth of 2.6 percent or 14,800 jobs, while estimated real personal income rose 2.6 percent, DBEDT said.

Yesterday's forecast predicts total wage and salary jobs rising by 1.8 percent this year and real personal income jumping 2.7 percent. The state economists were more optimistic in yesterday's report than they were last November when they forecast 1.5 percent job growth and 2.6 percent income growth.

"I think already you're going to see a lot of competition for the best employees," said state economist Pearl Imada Iboshi. "So it's a great time to be looking for a job and we expect to see increases in wages."

DBEDT's forecast is based in part on an estimated 3.2 percent rise in the cost of living in Honolulu this year — a figure that's lower than what private economists have predicted. Consumer prices rose 3.3 percent last year mostly due to higher housing and energy prices.

Higher housing costs will continue to eat into earnings this year, though a repeated increase in gasoline prices isn't likely, said Paul Brewbaker, chief economist at Bank of Hawaii.

"That's the real inflation generator — housing costs," he said. "Housing will continue to get more expensive and labor and other material costs will rise, generating upward pressure on prices."

Also yesterday DBEDT raised its visitor arrival estimate to 7.2 million. That would be an increase of 3.4 percent from 2004 and would break the record 6.95 million arrivals in 2000. That number also was revised up from the agency's November forecast, which anticipated 7.1 million visitors this year.

Beyond 2005, DBEDT is predicting economic growth to continue but at a slightly slower rate of 2.8 percent growth in real gross state product in 2006 and 2.6 percent in 2007.

Job and visitor arrival growth also are expected to slow in 2006 and 2007.

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