Kauai’s economy is persevering despite a slowdown in tourism.

A slowly improving labor market and signs of life in the construction sector should keep growth on track next year on the state’s fourth most populous island, economist Jack Suyderhoud told business leaders Thursday at the 40th annual First Hawaiian Bank Economic Outlook Forum at the Kauai Beach Resort.

"Like the rest of the state, the Garden Isle has seen strong tourism growth evolve into weakness in early 2014," said Suyderhoud, a First Hawaiian Bank adviser and professor of business economics at the University of Hawaii Shidler College of Business. "However, this has not yet hurt the overall economy (on Kauai) as real estate sales and prices have remained on positive trajectories benefiting from jobs and income growth and continued low interest rates.

"Guarded optimism may be the best description for 2015, especially if construction breaks out."

Suyderhoud said Kauai also has benefited from its unique agriculture-based businesses that are developing brand identities after the demise of sugar and pineapple caused total cropland acreage to fall more than 50 percent from 1982 to 2007. Harvested cropland fell even further during that period.

"The seed corn companies stepped into this vacuum and now farm about 2,500 acres out of 30,000 acres of total cropland," Suyderhoud said. Those companies employ 300 to 400 full-time workers, another 300 seasonal workers and have an annual operating budget of $80 million on the island.

There is a risk that farm jobs could suffer if Kauai County succeeds in its attempt to regulate genetically modified organisms, or GMOs, Suyderhoud said.

Kauai Coffee also has been caught up in the regulatory net aimed at the seed corn companies, Suyderhoud said.

"Through their European parent company, Kauai Coffee has focused on establishing a niche brand with some success, employing 90 full-time-equivalent employees with over 100 seasonal harvest workers," he said. "They want to expand their acreage, but this is on hold until the regulatory uncertainties are settled."

A federal judge ruled in August that a law passed by the County Council regulating GMOs was invalid. The county is appealing the ruling.

Suyderhoud also singled out Sunrise Capital’s Kauai Shrimp (more than 200,000 units shipped globally last year), Koloa Rum Co. ($5 million in annual sales) and the Hawaii Dairy Farm, a project of Grove Farm and the Ulupono Initiative, which produces enough milk to supply the entire island’s consumption with an annual operational budget of $6 million.

Even with agriculture playing an increasing role in Kauai’s economy, the island still depends on tourism for much of its economic vitality. But like the rest of the state, visitor arrivals have flattened out.

In 2013, visitor arrivals to Kauai rose 2.7 percent year over year to 1.1 million, but still below the 1.3 million peak in 2007. Through the first eight months of this year, Kauai visitor arrivals were down 0.8 percent to 763,684, according to data released Monday by the Hawaii Tourism Authority. Visitor spending through August was up 5.2 percent to $1 billion.

"There is concern that Kauai’s costs for airfare and lodging have turned off some price-sensitive market segments," Suyderhoud said. "Thus Kauai needs to improve its value proposition to visitors."

Suyderhoud said this seems to be happening with close to $30 million being invested in east-side hotel renovation and upgrades.

"The prospective sale of the Aloha Beach Resort should allow for renovation and possible re-branding," Suyderhoud said. "The Royal Coconut Coast Association continues to market and brand its offerings."

He said increased airline seat capacity to Kauai for the second half of this year will give the economy a lift.

"Overall, people in the visitor sector remain optimistic even given the swings in the arrival numbers," he said.

Growth in the job market also give reason for optimism, Suyderhoud said.

"There are now 2,300 more jobs since the low point in 2010," he said.

And the slowdown in the tourism sector is gradually being offset by a long-awaited rebound in construction, he said. Better things are on the horizon as shown by a recent upward trend in single-family housing permits, Suyderhoud said.

Grove Farm’s Pikake subdivision has sold 320 lots and has seen 150 houses built, he said.

"They are also planning another 200 lots as part of the Puakea master plan development and 46 more up-market units at their Waihohonu project at old Koloa Camp," Suyderhoud added.

Suyderhoud also noted that significant commercial activity is underway such as Longs in Kapaa, and Hokulei Village, which will be anchored by a Safeway lifestyle store that is expected to open in the first quarter of next year. Safeway will be joined by Walgreens, Petco, Jack-in-the-Box and Shell gasoline, he said.

In addition, the purchase of Coconut Market Place by ABC Stores means that this retail center might get a makeover, Suyderhoud said.

"Ohana Real Estate Investors plans for an 86-room hotel and 34 individual lots at the site of the former Hanalei Plantation Hotel in a $450 million, eight- to 10-year project that will create jobs as well as shoreline access to the rehabilitated Kamo’omaika’i fishpond," he said.