Hawaii’s economic expansion is shaping up to be better than the state expected.
Accelerated growth, more tourists, higher spending, increased construction permits and low unemployment were among the encouraging indicators in separate reports issued Thursday that showed the state is headed in the right direction.
“I don’t know about the future, but it’s been flat for us. The forecast seems optimistic. If it comes true that would be great. There’s ups and downs in the visitor industry, and we’re on a good ride. But with the strength of the dollar and the weakness of the yen, it’s not good times forever.”
“The economy is continuing on its expansion path,” said Eugene Tian, chief economist for the state Department of Business, Economic Development and Tourism, by telephone. “The economic growth rate is healthy, and the labor market is doing well.”
Hawaii’s inflation-adjusted gross domestic product — the broadest measure of economic output — is now projected to accelerate this year by 1.9 percent and by 2.3 percent in 2016, according to a third-quarter report by DBEDT. Those growth rates are much higher than the 0.8 percent growth rate in 2014 and the average growth rate of 1.3 percent during the past four years, DBEDT said.
In another report the state’s seasonally adjusted unemployment rate plunged three-tenths of a point in July to 3.7 percent, according to the state Department of Labor and Industrial Relations. It was the lowest level in more than seven years — or since April 2008 — when it was 3.6 percent. The number of payroll jobs, however, declined by 2,000 jobs to 632,700 as the number of people holding multiple jobs decreased and the number of people self-employed increased. Payroll jobs don’t include those who are self-employed.
“Although we haven’t seen the 5.0 to 6.0 percent economic growth rates experienced during the previous business cycle, our economy has recovered since 2011 (and) Hawaii has been on the expansion path,” DBEDT Director Luis Salaveria said in a news release. “Our employment and payroll job count both were fully recovered by last year and during the first half of 2015, both reached the historic high levels. Our unemployment rate during the first half of 2015 was the seventh lowest in the nation.”
The state’s tourism industry continues on track for its fourth consecutive record year for visitor arrivals and spending.
DBEDT revised upward its projection for the state’s No. 1 industry and now expects visitor arrivals to rise 4.3 percent and reach a record 8.7 million this year. That’s up from DBEDT’s May forecast for a 2.5 percent increase. In addition, DBEDT sees visitor spending rising 3.8 percent to a record $15.5 billion this year. That is up from the 2 percent increase projected in DBEDT’s previous forecast.
But as promising as the economic growth and tourism forecasts sound, Hawaii merchants aren’t buying it and say the projections seem too rosy.
“I don’t know about the future, but it’s been flat for us,” said ABC Stores CEO Paul Kosasa, who oversees 35 stores in Honolulu, most of them in Waikiki. “The forecast seems optimistic. If it comes true that would be great. There’s ups and downs in the visitor industry, and we’re on a good ride. But with the strength of the dollar and the weakness of the yen, it’s not good times forever.”
Tian said DBEDT raised its tourism forecasts because of strong visitor numbers during the first half of the year and continued growth in scheduled air seats, which will increase by 4.7 percent during the second half of 2015.
GROSS DOMESTIC PRODUCT
Sources: State Department of Business, Economic Development & Tourism; state Department of Labor & Industrial Relations
DBEDT also reported that the construction industry continues to boom with the value of private building permits issued during the first half of the year increasing by 36.6 percent over the same period in 2014. Construction jobs rose 3.1 percent during the first half of 2015, the second-highest growth among all the industries and just behind the arts, entertainment and recreation sector, which was up 3.3 percent.
Carol Ai May, vice president of hardware retailer City Mill, said the local chain is not benefiting from the so-called construction boom.
“There’s so much publicity about construction in Kakaako, you would think business is quadrupling all over the place and everything is sold out,” she said. “I don’t know if it’s just real estate hype — and I think there’s probably growth in pockets — but overall if our business is a barometer of how the average Hawaii resident is doing, then it’s about the same as last year, maybe slightly better.”
City Mill President and CEO Steven Ai, Ai May’s brother, said sales have been growing by single digits.
“We’re geared for repair and maintenance of the home and office for do-it-yourselfers, commercial and remodelers,” he said. “So we’re not as affected by the largo condo projects that are occurring throughout the Kakaako area and other places.”
He said Hawaii should expect more than a growth rate of just 1.9 percent this year.
“As a community we would want something more robust,” he said. “The 1.9 percent growth rate seems anemic.”
While Tian, the DBEDT economist, acknowledged the number is low, he said the state’s 1.9 percent forecast for 2015 is 1.1 percentage points higher than the 0.8 percent growth rate in 2014.
That 1.1 percentage-point increase is a faster growth rate than what DBEDT projected in May when it said it expected the economy this year to grow 2.5 percent, just 0.4 percentage point above what it believed was 2.1 percent growth in 2014.
DBEDT changed its growth forecast in this latest report after new estimates by the U.S. Bureau of Economic Analysis lowered Hawaii’s growth rate for 2011 through 2013 and, in the BEA’s first assessment of 2014, said the state’s growth in 2014 was just 0.8 percent, the lowest in Hawaii since the recession ended at the end of 2009.
“The BEA’s numbers are based on the data they collect, mostly on income and employment,” Tian said. “BEA’s practice is every time they release a number for GDP, they revise the previous few years. But the new data doesn’t mean the economy is slowing down or getting worse. It’s purely a technical data issue. So if the economy is compared with the previous few years, it’s growing at a very good rate.”