Expect a 'choppy' economic recovery
BY Greg Wiles
Advertiser Staff Writer
A new forecast says a recovery is in progress for some parts of Hawai'i's economy, but that the overall pace of it will be slow and won't deliver lower unemployment soon.
The report from the University of Hawai'i Economic Research Organization notes there has been better news for the economy in recent months, with visitor arrivals rising slightly and employment stabilizing. In other sectors, notably construction, the job losses have continued, though at a lower rate of increase.
"It's going to be a choppy recovery," said Carl Bonham, executive director of UHERO, one of the state's main economic forecasting groups.
"You're going to have some good quarters and potentially some bad quarters."
Overall, the forecast paints a picture of an economy that may have seen the worst of a downturn and is starting an unhurried turnaround. Like many parts of the country, the state during the past 18 months has witnessed an agonizing jump in job losses and bankruptcies.
Hawai'i's unemployment rate has been at levels not seen in three decades, while foreclosures have risen and an alarming number of well-known businesses have closed their doors.
But UHERO's data show job losses bottomed on a seasonally adjusted basis last year at hotels, restaurants, banking and real estate. Bonham said tourist expenditures stopped falling in September when adjusted for seasonal variations.
That growth will be tempered by possible job losses in other areas of the economy and a construction industry that will see a 17 percent contraction in spending this year.
"Depending on what sector you're in, it's not going to feel that different from 2009," Bonham said.
The UHERO forecast is similar to one issued by the state Department of Business, Economic Development and Tourism in late February. It said the state's economic stupor was abating and that a slow recovery would being to take hold this year.
UHERO's forecast calls for overall visitor arrivals to rise 2.9 percent this year with slightly higher growth in 2011.
It projects U.S. tourist arrivals will rise by 1 percent this year, while Japanese visitors will grow at an 8.1 percent rate.
Meanwhile it estimates payroll jobs will decline 0.8 percent this year with the jobless rate coming in at 6.9 percent. Unemployment typically lags behind an upturn in economic activity.
"The unemployment rate is going to remain elevated for two more years," Bonham said.
"Basically we're going from 6.8 percent in 2009 to 6 percent in 2012."
He said the state's gross domestic product will essentially be unchanged this year, along with personal income adjusted for inflation. Inflation will rise to a modest level, driven in part because of rising energy prices.
UHERO also noted the possibility that the recovery could be disrupted if U.S. and European economies contract or if the state and county budget problems worsen.
"Things are moving in the right direction, but there are still risks that you could get," Bonham said.