Moderate growth seen for economy

The state is forecasting Hawaii’s economy to improve modestly this year, helped by double-digit growth in visitor spending.

The forecast released Tuesday by the Department of Business, Economic Development and Tourism calls for a 1.4 percent increase this year in inflation-adjusted gross domestic product, the broadest measure of economic activity in Hawaii. That’s up from a forecast of 1.3 percent growth the department published three months ago.

Leading the way will be a 13.1 percent increase in visitor spending to $12.6 billion, according to the forecast. That’s up from one three months ago for a 12 percent increase.

"The double-digit visitor expenditure growth is very encouraging,"said department Director Richard Lim. "Too often we focus on how many visitors are arriving. It’s very important to look at how much they are spending, and this is the driver of our economy."

Department economists revised the forecast for visitor spending upward despite lower expectations for visitor arrivals. The 7.26 million arrivals forecast for 2011 would represent a 2.5 percent increase from 2010. The agency previously had forecast a 3 percent increase in 2011.

The department upgraded its forecast for inflation-adjusted personal income. The agency now says it is expecting real personal income to grow by 1.3 percent in 2011, up from its previous forecast of a 0.8 percent gain.

Job growth, which has been slow to recover after the 2008-2009 recession, is expected to continue making incremental gains. The state is forecasting the number of payroll jobs to average 600,900 this year and 610,500 next year. That would equate to annual increases of 1.3 percent and 1.6 percent.

The agency doesn’t expect the job market to make a full recovery from the recession until 2014, when the total number of jobs in the economy is expected to reach 630,800. That is more optimistic than a recent forecast by IHS Global, a Boston-based consulting firm that predicted payroll jobs won’t reach pre-recession levels until the middle of 2015.

Sluggishness in the job market also has translated into higher unemployment in recent months. The state Department of Labor and Industrial Relations reported last week that Hawaii’s unemployment rate rose to 6.5 percent in October, the fourth-straight monthly increase. Hawaii’s unemployment rate was the 11th lowest in the country in October, but as recently as June it was sixth lowest.

Inflation is forecast to accelerate slightly in 2011 to 3.3 percent from 2.1 percent in 2010.

The report is generally in line with a forecast released last week by Leroy Laney, a professor of economics and finance at Hawaii Pacific University.

Laney estimated job growth at 1.3 percent in 2011 and 1.2 percent in 2012. He predicted visitor arrivals of 3.2 percent in 2011 and 2.6 percent in 2012.