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The Honolulu Advertiser
Posted on: Saturday, February 28, 2009

WEAKENING ECONOMY
Outlook turns gloomier in Hawaii and on Mainland

Hawaii news photo - The Honolulu Advertiser

Tourist numbers and spending are already down, and the state expects to see 5.9 percent fewer visitors this year. But they should start trickling back next year, the forecast says.

ADVERTISER LIBRARY PHOTO | February 2008

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Hawaii news photo - The Honolulu Advertiser
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The state is lowering its economic forecast yet again, paying heed to gloomy U.S. and international economies.

The forecast adjusts prior estimates for Hawai'i downward, with the forecast pointing to a generally tough year in 2009 followed by slow growth in 2010 and 2011.

"We are hopeful of a turnaround beginning late this year, but recovery is likely to be a gradual process," said Ted Liu, head of the state Department of Business, Economic Development and Tourism, which makes the projections. It was the second consecutive quarterly forecast in which the state has revised projections downward.

The dreary outlook should come as no surprise to anyone following economic news of the nation and state during the past year, as the subprime mortgage problem, credit crisis, job losses and Wall Street meltdown all took a toll on consumer confidence and the U.S. economy. One consequence is lower tourism for Hawai'i as people hunker down and cut back on spending.

Indeed, the DBEDT forecast estimates visitor arrivals here will fall by 5.9 percent to 6.4 million this year, before enjoying a slight increase in 2010 and more robust gain in 2011. The government agency previously had thought tourist arrivals would only fall by 1.9 percent this year.

But "based on recent Hawai'i data and the less optimistic national and international outlook, visitor arrivals are now expected to decline a more substantial 5.9 percent for 2009 as a whole," DBEDT's forecast said.

The decline figures in a forecast of shrinking visitor expenditures this year, which come on the heels of a double-digit percentage decline in tourists' spending last year.

There is a similarly dour outlook for jobs, which are forecast to dwindle this year after no growth last year. Hawai'i's jobless rate has been rising in the past nine months, with seasonally adjusted unemployment reaching a 10-year high in December at 5.5 percent.

The DBEDT forecasts that the number of wage and salary jobs will decline by about 8,300 this year to 621,700 before swinging to tepid growth in the following three years. Since the start of the year, more than a half dozen companies have had so-called mass layoffs of 50 or more workers.

Among the companies cutting payrolls are Matson Navigation Co., the Honolulu Star-Bulletin and Maui Land & Pineapple Co.

"Total wage and salary jobs in Hawai'i are now expected to decline 1.3 percent in 2009 instead of the no-growth performance previously projected," the report said. Construction jobs may decline further because the state doesn't expect a boost in government projects to offset a downturn in private-sector building.

"In 2010, jobs should stabilize but with little or no net growth."

The forecast also projects:

• Gross domestic product adjusted for inflation will contract this year by 0.2 percent. Just two years ago, state GDP rose by 3 percent.

• Personal income adjusted for inflation will fall for a second straight year in 2009.

• The number of days visitors spend here will fall this year by 4.4 percent.

The report also cut its inflation estimate, expecting Honolulu's Consumer Price Index to rise by only 1.2 percent this year. That's less than half the 2.6 percent it forecast late last year.

Liu said President Obama's stimulus package may have a positive impact beginning in the second half of the year. He said that will allow the state to make investments, especially in energy.

DBEDT's forecast does show some increasing optimism for 2011, along with a sunnier outlook for the state in 2012. It is the first time the agency has released 2012 projections.

In 2011 the forecast calls for visitor arrivals to spring back by 4.6 percent and to be followed by a slightly stronger gain the next year.

An even bigger rise in visitor spending is forecast for the two years, with gains of 7.2 percent and 8.0 percent respectively.

At the same time, real personal income is expected to rise 1.0 percent and then 1.2 percent.

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