Economic growth in Hawaii this year took a couple knocks from natural disasters but hasn’t been stopped, according to an academic report being released today.
The report from the University of Hawaii Economic Research Organization said the pace of the state’s economic expansion slowed after a lava eruption on Hawaii island and immense flooding on Kauai earlier this year.
One key economic indicator, employment, is now forecast by UHERO to rise by 0.6 percent this year instead of 1.1 percent as the organization forecast in a report finished in May, shortly before Kilauea erupted on Hawaii island in an episode that lasted three months and led to the closure of the state’s No. 1 visitor attraction Hawai‘i Volcanoes National Park.
Expressed in terms of job numbers, a 0.6 percent increase translates to about 4,000 more jobs compared with almost 7,400 at the 1.1 percent growth rate.
“The natural disasters hitting the Big Island and Kauai have left a mark on labor market conditions,” the new report said, noting that unemployment has ticked up on the two neighbor islands.
Job losses in tourism because of the disasters are expected to be short term, while overall employment in tourism statewide is expected to be relatively strong because visitor arrivals and spending are still higher than last year, the report said.
UHERO also said some of the recent softening in the labor market expansion is due to the construction industry that has eased up a bit but should hold steady near its current level for the next several years because of major building projects in the pipeline.
Positive contributors to employment have been led by the health care sector, while wholesale and retail trade jobs have changed little, according to the report, which also said jobs in real estate and finance are rebounding from a drop last year while public sector jobs are down nearly 1 percent for the year so far.
Report authors expect that Hawaii’s unemployment rate will edge upward over the next few years from about 2.1 percent this year to 3 percent in 2021, which is not necessarily a bad thing because 3 percent is considered by economists to be full employment. UHERO was forecasting such a rise previously.
A couple of significant changes to UHERO’s latest economic forecast compared with the one it issued in May include lower projected growth for real personal income and inflation.
UHERO expects real personal income, which is income after adjusting for inflation, will rise by 1.5 percent this year instead of 2 percent. However, the organization also expects inflation also will be lower, rising by only 1.9 percent instead of 2.6 percent.
Real personal income measures how much people earn after discounting how much more goods and services cost. UHERO’s report said a major reason why inflation should be relatively low is because housing rents are being kept in check by an almost 0.5 percent population decline since 2015 that has tamped down demand for rentals.
“Since the shelter component represents 40 percent of local household spending, this has been the key factor keeping a lid on inflation,” the report said.
For the broadest measure of the state’s economy, which is the production of all goods and services expressed as gross domestic product adjusted for inflation, UHERO expects 1.8 percent growth this year. That figure was the same in the May forecast and is up from a 1.2 percent increase last year. Hawaii’s economy has grown for the last eight years, and UHERO expects that to continue through 2021.
