Hawaii's economic torpor will stretch into next year with the back half of 2010 looking better than the first six months.

That was part of the message delivered yesterday at First Hawaiian Bank's annual Economic Outlook Forum where economist Leroy Laney characterized 2010 as a year of transition to more and sustained growth in the future.

"2010 may be a year of stabilization in the Hawaii economy, but it will likely be 2011 before sustained recovery sets in, and that's in spite of an improving picture at the U.S. national level and tenuous recovery in Japan," Laney told more than 500 executives and others gathered for the forecast briefing at the Dole Cannery ballroom.

The crowd was among the larger groups for the annual economic presentation, as people sought more insight about when the state's pernicious economic downturn will lift. The recession has driven up Hawaii unemployment to three-decade highs, produced a spike in bankruptcies and forced some well-known companies to close.

Laney painted a picture of a slow climb back with possibly more robust activity occurring in 2011. The slow recovery scenario is shared by Paul Brewbaker, principal of TZ Economics and senior economic adviser to Bank of Hawaii. Brewbaker released a forecast late last month showing the downturn will continue into next year, though some improvement will occur during the second half.

"The second half is where the numbers come back and the 'feeling part' of it comes back," Brewbaker said, noting people will start noticing a lifting of the economic feebleness later in the year.

GOOD NEWS AND BAD

Laney's forecast had good and bad news for the state, with unemployment projected to continue to rise to a full-year average of 7.5 percent, while a small decline (0.5 percent) in jobs will occur .

"The labor market is usually a lagging indicator, so don't expect that to be where our recovery starts," Laney said.

"Other things like tourism have to show signs of sustained improvement before firms start to hire again."

Moreover, he said, there will be financial pressure on government to curtail hiring, and construction will continue in a downturn mode. He said state government may see more budget reductions because its actual deficit may turn out to be worse than is now seen.

On a positive note, Laney projected tourism arrivals to grow given comparisons to weak 2008 numbers. He sees the counts increasing by 1.7 percent next year, though noted spending may be hit by price discounting to lure visitors here.

"As 2010 progresses, without now unforeseen shocks, the visitor industry could look increasingly better," he said.

MORE PREDICTIONS

Laney, who is a Hawaii Pacific University professor and is economic adviser to First Hawaiian, said personal income will likely be sub-par, but could break into the positive for the year as a whole.

He is forecasting a 0.5 percent increase in this category when adjusted for inflation, which he projects will rise 1 percent.

"We only go out one year in these forecasts, so I hope that next year when I stand before you I can project an ingrained recovery," Laney said. "But patience may be the key word this year."

Brewbaker's forecast doesn't foresee as much progress in the economy as Laney's, though it too shows some lessening in declines that occurred this year.

His forecast calls for a 1.3 percent drop in jobs, while unemployment will rise to 8.4 percent.

Personal income adjusted for inflation will fall 1.1 percent, or less than the 2.5 percent he says is occurring in 2009.

Inflation will be 1.2 percent, up from what he believes will be 0.2 percent disinflation this year.

Brewbaker's forecast also foresees visitor arrivals growing by 3.7 percent this year, as an increase in Mainland tourists offsets a decline in those from Japan. Brewbaker noted the Mainland economy is improving, but a big jump in tourists from there won't occur immediately.

The economist said he realizes his forecast may be slightly more negative than others.

But "a trip to Hawaii is not high on the list of things people need right now," he said.