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Coronavirus scare could cost Hawaii 6,000 jobs, economists warn

  • DENNIS ODA / DODA@STARADVERTISER.COM
                                Emergency medical technician Cyrus Camp on Tuesday demonstrated the personal protective equipment that EMTs put on when responding to possible coronavirus cases in Hawaii.

    DENNIS ODA / DODA@STARADVERTISER.COM

    Emergency medical technician Cyrus Camp on Tuesday demonstrated the personal protective equipment that EMTs put on when responding to possible coronavirus cases in Hawaii.

A new report by University of Hawaii economists predicts the coronavirus scare will cause visitor spending in Hawaii to fall by more than 10% and wipe out nearly 6,000 jobs, but acknowledges there are a “wide range of other possible outcomes.”

Earlier this year the University of Hawaii Economic Research Organization (UHERO) suggested it was at least plausible Hawaii’s economy would shake off the economic impact from the new coronavirus as it did when severe acute respiratory syndrome, or SARS, threatened the travel industry in 2002.

However, “in the past two weeks, things have changed markedly,” according to the new report.

“While new infections have slowed markedly in China, the spread of the novel coronavirus in South Korea, Iran, Italy, Japan, and now more than two-thirds of U.S. states, suggests a more prolonged outbreak is in the cards,” according to the report. “And the longer the virus spreads, the greater the human and economic toll.”

By the first week of March, Hawaii’s international passenger counts had declined by 32% from last year’s level, and while domestic arrivals are off only slightly from last year, “we expect that to change quickly as the coronavirus spreads on the U.S. mainland,” according to the new UHERO report posted online Tuesday.

“Based on these recent developments, we have now substantially marked-down our baseline forecast for Hawaii’s visitor industry and broader economy,” the report states. “The rolling nature of disease outbreaks — and the potential for significant knock-on macroeconomic effects — will likely result in a downturn that is much more severe than we saw with SARS.”

The report predicts visitor arrivals will fall sharply by 13% in the second quarter of this year, and be off by more than 7% for the year as a whole. The recovery will begin by this summer but not be complete until a year later, according to UHERO.

The report also projects some grim employment numbers, with about 6,000 jobs lost by the third quarter of this year, and “a very restrained pace of hiring for the next several years.”

“Among the counties, Honolulu is most adversely affected, because of its heavier reliance on international markets, but all islands see a substantial decline in visitor numbers this year and a protracted recovery period, as well as aggregate job losses,” according to the report.

The uncertainties have prompted UHERO to develop a range of scenarios. The most optimistic is a SARS-like chain of events in which the virus is “well contained” by the end of March and travel patterns begin to recover in April.

More alarming is a scenario in which the virus’ spread and impacts are longer-lasting, and could push the U.S. and global economies into a recession. That could drag down Hawaii arrivals by nearly 20% by the second quarter, and delay a full recovery until 2022. That could lead to a decline in payroll employment of 1.3% this year.

“It is important to note that we do not consider this a ‘worst case’ scenario, which given current uncertainty is impossible to tie down,” the report warns.

The UHERO report comes just hours after the state Department of Taxation posted a report Tuesday detailing very strong growth in Hawaii tax collections thus far for the fiscal year that began July 1.

Tax collections to date have been running 7.5% ahead of the collections for last year, but those numbers are expected to drop off as the impact from the COVID-19 scare sets in.

A panel of experts called the state Council on Revenues meets this morning to try to calculate what that impact on tax collections might be. If the council concludes the decline in tax collections will be particularly steep, that could trigger a round of state budget cuts that would expand the sphere of economic pain.

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