Quantcast
  

Wednesday, April 23, 2014         

 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

All you need is LUV

Hawaii's economy is improving, but the degree of the rebound is uneven

By Dave Segal

POSTED:


There's a LUV connection going on right now with the Hawaii economy.

And it all has to do with how local economists perceive the state's recovery from the nearly two-year national recession.

Spelling out a recovery

Economists characterize the economic recovery partly in terms of the curves that statistics take when plotted on a graph. Various sectors might be described as taking L-, U- or V-shaped trajectories:

L IS FOR THE OVERALL ECONOMY

The National Bureau of Economic Research says the recession began in December 2007 and ended in June 2009, although it took 15 months, until September 2010, until the bureau officially could say the recession had ended. Now, according to First Hawaiian Bank economic adviser Leroy Laney, the state is in the midst of an L-shaped recovery.

U IS FOR THE TOURISM SECTOR

Hawaii's seasonally adjusted total visitor arrivals, which plunged following the spring 2008 shutdown of Aloha and ATA airlines, have snapped back through September of this year in a U-shaped recovery.

V IS FOR HOME SALES

Sales of existing homes dipped sharply through the recession but have picked up just as sharply as recessionary pressures have eased. Quarterly single-family home and condominium sales statewide show a V-shaped recovery.
The L, U and V characterize the shapes created by graphs depicting how various sectors of the state economy are rebounding. While all the Hawaii economists agree that things are getting better, the degree of improvement is in the eyes of the beholder.

"My observation is that 2010 has revealed more of an alphabet soup," said Paul Brewbaker, principal of TZ Economics. "Different people will emphasize different aspects of the word 'LUV.' Some focus on the L, others on the V, still others contemplate the width of the U."

Brewbaker says jobs are the most L-shaped, real personal income has kind of a flattish U shape, the visitor arrivals count has a decidedly U shape to it and existing home sales are positively V-shaped.

First Hawaiian Bank economic adviser Leroy Laney told a group of several hundred Thursday at the 41st annual Business Outlook Forum that the Hawaii economy overall has been undergoing an L-shaped recession and that "this year we have emerged from the back of that L, and are in the bottom of it."

"Of course," Laney said, "there is still some question as to how steep a slope the bottom of that L will be," but there is "evidence that a slow recovery is emerging for Hawaii."

In all cases the spotlight appears to be on the state's leading industry, tourism, which is leading the charge.

Visitor arrivals are up 7.2 percent this year, through September, over the same period in 2009, and going back to May have posted increases of 6.5 percent, 13.6 percent, 9 percent, 11.8 percent and 8.9 percent. At the same time, visitor spending has risen 15.9 percent, 16.1 percent, 23.3 percent, 30 percent and 22.2 percent, leaving it up 13.5 percent for the year.

Brewbaker attributes some of the sharp visitor arrivals recovery to the aggressive domestic expansion by Alaska Airlines following the spring 2008 collapse of Aloha and ATA airlines.

"The arrivals metric has been on this amazing tear since the spring, and domestic counts (up 5.1 percent through September) at this moment are knocking on the door of the all-time highs of 2006 and 2007," Brewbaker said. "This year's tourism re-acceleration is mostly domestic, not international."

He said the year-to-date, year-over-year comparisons of international arrivals (up 13.4 percent) include the impact last year of the H1N1 pandemic on international arrivals.

"Organic growth now is coming from the 20 to 30 percent annualized rate of increase in domestic arrivals during the last six months, not the zero change -- more or less -- in international arrivals ever since H1N1's deterrence faded," Brewbaker said.

Laney said at the forum that both tourism -- which he expects to approach record visitor arrival numbers in 2012 -- and construction have to return to health before a sustained recovery emerges.

"Construction adds to and refurbishes the physical plant and capital stock at the same time it creates relatively higher-income jobs," Laney said.

The University of Hawaii Economic Research Organization, headed by Executive Director Carl Bonham, said it expects continued Hawaii expansion but at a restrained pace through 2011.

"The visitor industry is leading a gradual but uneven recovery in Hawaii," UHERO said in its Oct. 1 forecast update. "The tourism upturn has not yet had much effect on the broader economy, and the slowing global recovery means further visitor gains will be harder to come by."

UHERO said the recovery will gain strength slowly over the next several years but be tempered by still-weak conditions in major visitor markets, drag from government and a difficult environment for construction.

The state Department of Business, Economic Development and Tourism said in its third-quarter report issued in mid-August that it expects international economic conditions and increasing tourism arrivals and expenditures to help sustain a gradual recovery in Hawaii's economy. DBEDT is due to issue its fourth-quarter report in mid-November.

Brewbaker said the bottom line is that Hawaii may be getting better than the "L rhetoric implies."

"I'd say a good one-third to one-half of the economy is U-ish, nearly as much is shallow U-ish and the remainder that is L-shaped is saying, 'It's cheaper to buy than build, but don't wait too long.'"

Laney said a year ago that Hawaii needed to see a turnaround in tourism to begin recovering because a Hawaii vacation is a luxury item in most household budgets -- and is one of the first things eliminated when things get tough.

"But Hawaii tourism has proven to be more resilient than most of us thought a year ago," he said.

Still, Laney said an economic recovery begins when positive growth resumes after a recession and doesn't end until the previous peak is reached.

"The 2006-2007 peaks for a number of important economic variables won't be reached for some time, but at least the direction is right for most of them at present," he said.






 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

COMMENTS
(0)
You must be subscribed to participate in discussions
By participating in online discussions you acknowledge that you have agreed to the TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. Because only subscribers are allowed to comment, we have your personal information and are able to contact you. If your comments are inappropriate, you may receive a warning, and if you persist with such comments you may be banned from posting. To report comments that you believe do not follow our guidelines, email commentfeedback@staradvertiser.com.
Leave a comment

Please login to leave a comment.
IN OTHER NEWS
Latest News/Updates
Blogs