UH economists forecast wage gains for Hawaii workers

It may be hard to recognize at the supermarket checkout or looking at bank statements, but personal income for Hawaii residents should be making a bigger gain this year after two years of lackluster growth.

The University of Hawaii Economic Research Organization forecasts in a report being released today that real personal income will grow by 2 percent in the state this year.

The number might appear small, but real personal income isn’t just how much people take home in their paycheck; it includes the impact of inflation, or how much more goods and services cost.

UHERO predicts that inflation this year will be 2.6 percent, so the projected income gain not adjusted for inflation amounts to 4.6 percent.

If UHERO’s forecast is right, Hawaii real personal income growth would be the most since 4.3 percent in 2015 when inflation was just 1 percent.

Last year real personal income growth was a scant 0.5 percent and followed 1.3 percent in 2016.

UHERO said the uptick this year is being driven by job growth in a tight local labor market where unemployment has likely bottomed out at about 2 percent after being under 3 percent since mid-2016.

“The good news for workers is that the tight labor market should finally translate into meaningful increases in real wages,” UHERO’s report said.

Hawaii’s economy is in the midst of a ninth year of growth with expected higher inflation-adjusted gross domestic product, the broadest measure of economic output.

Economists who produced the report said Hawaii’s tourism industry, which is on pace to set a seventh consecutive record for visitor arrivals this year, should produce much of the expected gain in jobs.

UHERO noted that Hawaii’s labor force has grown by about 1,500 in the past four months. The organization expects jobs in the accommodation and food services sector will grow the most at 4 percent this year. Other job sectors forecast for growth this year are health care at 3 percent and transportation and utilities at 2.6 percent. Jobs in the public sector and construction are forecast to be flat.

“The state’s labor market continues to run red hot,” the report said. “At this point, virtually everyone who wants a job has one, and businesses are having difficulty finding workers with — or even without — the skills they need.”

UHERO forecasts that Hawaii’s unemployment rate will start to tick up over the next two years, from an expected 2.1 percent this year to 2.3 percent next year and 2.6 percent in 2020.

As a result, the relatively big gain in real personal income this year is expected to taper a bit to 1.8 percent next year and 1.5 percent in 2020, staying above what UHERO characterized as disappointing levels of the last two years.