The impact of the recession on Hawai'i won't be as severe as previously thought, although the road to economic recovery will still be long and slow, according to the latest forecast from a group of University of Hawai'i economists.

Higher-than-expected arrivals of Japanese visitors will help blunt the downturn in tourism, according to the quarterly report from the University of Hawai'i Economic Research Organization released today.

Overall visitor arrivals are forecast to fall 4.4 percent this year, a significantly smaller decline than the 6.8 percent decline forecast just three months ago. Arrivals from Japan are forecast to decline by 4.1 percent this year, a downward revision from the 13.8 percent decline UHERO published in its June forecast.

Overall visitor arrivals are forecast to increase by 3.2 percent in 2010 and by 3.1 percent in 2011.

The negative impact on the Japan visitor market from the swine flu, or H1N1 virus, turned out to be less severe than initially expected, the forecasters said. Indeed, the number of Japanese visitors to Hawai'i soared to about 6,500 to 7,500 per day during the recent Silver Week holidays in Japan from the usual average of about 2,500 to 3,000 per day, according to officials with the Hawai'i Tourism Authority.

"Japanese visitor arrivals recovered more quickly than expected from the H1N1 virus," the UHERO economists wrote.

Economic recoveries under way both on the Mainland and in the rest of the world eventually will flow through to Hawai'i, the report said.

"Japan returned to growth in the second quarter, and it appears likely that the U.S. will post positive growth for the current quarter," the report's authors wrote. "It is harder to find evidence of turnaround in the Hawai'i economy, although we expect recovery to begin early next year."

While economic conditions will begin to improve, that will not mean a rapid return to economic health, according to the report.

"Because of the anticipated weak U.S. and Japanese consumer spending and the drag from continuing state fiscal problems, the local economy will take a number of years to recover," the report said.

The job market will be one area that will continue to languish even after other economic numbers turn positive. Employers in past downturns have been reluctant to resume hiring until they are sure the economic recovery is well entrenched.

UHERO is forecasting Hawai'i's jobless rate will rise to 8.1 percent next year from 7.4 percent this year. It is predicted to remain relatively high, 7.5 percent, in 2011.

Inflation-adjusted personal income is forecast to decline 1.1 percent this year and 0.2 percent next year before returning to positive territory — 1.5 percent — in 2011.

"State fiscal problems will temper income and employment gains as the economy claws its way back to life over the next two years. As a result, unemployment will remain relatively high for a number of years, income gains will be hard to come by, and economic conditions will remain difficult for many families."