Hawaii’s unemployment rate inched up to its highest level in two years amid signs the state’s economic growth is slowing, especially in tourism.
Hawaii’s seasonally adjusted January unemployment rate rose to 2.7 percent, according to figures released Friday by the state Department of Labor and Industrial Relations. The rate was 0.1 percentage point higher than the prior month and 0.4 percentage point more than January 2018.
The highest over-the-month job losses came from the leisure and hospitality sector, which ended 2018 just shy of 10 million arrivals, an increase of nearly 6 percent from a record- setting 2017. Last year nominal, or not inflation-adjusted, visitor spending increased by 6.9 percent to more than $17.8 billion.
But signs of softening began to emerge in the back half of the year and have carried over into 2019. That softness, in part, is a reason Hawaii’s tourism and leisure sector eliminated 1,700 jobs over the month — the most of any other category in the January jobs report.
The count of unemployed people statewide rose to 18,000 as total nonagricultural jobs decreased by 1,300 from December to January. Tourism-related job losses were more than five times greater than job losses in information services and in professional and business services, which each lost 300 jobs.
“Basically, January statistics showed that the tourism sector was weak in January,” said state Economist Eugene Tian.
Hawaii’s tourism industry started 2019 with its deepest monthly drop in visitor spending in more than three years. While arrivals rose 3 percent to 820,621 visitors in January, monthly spending fell nearly 4 percent to $1.62 billion.
Tian said a month’s data do not indicate a trend, so a clearer picture of the state of the tourism industry will emerge in a few months. One data point to consider is the change in where visitors are staying, he said.
Visitors staying at rental houses in January increased 17.7 percent, while visitors staying in shared rooms in private homes increased 21.7 percent, according to Tian. Visitors staying in hotels decreased by 0.8 percent, and the hotel occupancy rate decreased by 2.8 percent.
Tian said the hotel report is consistent with Friday’s labor data showing that accommodation and food services jobs decreased by 1.5 percent.
“Usually (alternative accommodations) are less labor-intensive and don’t generate too many jobs. Also, spending by a rental house guest is usually lower — that’s why they want to stay in a vacation rental rather than a hotel, because the cost is less,” Tian said.
DLIR spokesman William Kunstman said the Hawaii hotel workers strike may have contributed to the tourism job losses, as did the closure of three Oahu restaurants owned by the Japanese company Pier Thirty, including Cafe Lani, Tempura Ichidai and Gokoku Sushi.
Kunstman said provisions in the unemployment law allow some workers to file claims in certain instances during a strike. More than 2,700 workers on Oahu and Maui were on strike from Oct. 8 to Nov. 27 at the Sheraton Waikiki, Royal Hawaiian, Westin Moana Surfrider, Sheraton Princess Kaiulani and Sheraton Maui.
Sumner La Croix, professor emeritus of economics at the University of Hawaii at Manoa, said the 35-day federal government shutdown also could have had an impact. But La Croix also pinned the dip in tourism jobs on growing caution about the U.S. economy.
“In general, people are becoming a little more cautious about discretionary spending. We saw it in the high-end real estate, and we could be seeing it now in high-end tourism,” said La Croix, a senior research fellow at the Economic Research Organization at UH.
Despite job losses to tourism and other sectors, Hawaii’s unemployment level is still near historic lows. Some 658,500 people were employed statewide in January. Over-the-month job gains came from the trade, transportation and utilities sector, which added 500 jobs; government, which expanded by 400 jobs; and financial activities, which increased by 100 jobs.
Employment remained stable in construction, education and health services, manufacturing and other services.
Hawaii’s labor market also is performing better than the nation as a whole. Nationally, the seasonally adjusted unemployment rate was 4.0 percent in January, compared with 3.9 percent in December.
The state Department of Business, Economic Development and Tourism expects the tourism sector to improve as more visitors come this year, Tian said. DBEDT upwardly revised its tourism expectations Wednesday from November’s forecast of 1.8 percent growth, to 2 percent growth.
Tian said the revision was based on additional visitors coming from Japan due to Super Golden Week, an unusually extended holiday travel period that runs April 27 to May 6, and the addition of air seats for the Japan market this summer. The new forecast doesn’t take into account the entry of Southwest Airlines into Hawaii.
“Our next projection will be in May. We may revise our numbers when more data are available,” Tian said.
