Hawaii residents should not expect any meaningful broad recovery in the state economy until the middle of next year.
That’s the dour conclusion of a new University of Hawaii Economic Research Organization assessment of where the state economy is headed and how quickly.
In addition to the roughly nine-month wait for meaningful economic gains, UHERO said it’s most likely that the rebound — even with COVID-19 decently managed — will be sluggish, starting with a 1.2% gain next year.
“It is growth, but … that’s basically flat,” said Carl Bonham, UHERO executive director.
The UHERO forecast, which was released for publication today, does have an alternate, more optimistic scenario for a Hawaii economy rebound — 4.2% growth next year — that could happen if less likely things occur, including receipt of significantly more federal aid.
But there’s also a second alternate outlook with a more pessimistic view that could hit Hawaii residents with a further gut punch — a 2.5% decline next year — if a third wave of Hawaii COVID-19 cases emerges during the fall and winter without an effective vaccine widely available until late next year.
Even with the base-line projection where UHERO has its highest confidence, anticipated economic growth is pretty soft.
“It’s not gloomy in the sense that (the economy) is moving in the right direction, but it’s a weak recovery,” Bonham said.
Key pieces of Hawaii’s economy discussed in UHERO’s report include employment, tourism, construction and real estate.
According to the base-line forecast, UHERO expects employment will rebound at a slower pace than it has in recent months and that the number of people with jobs will edge up 1.7% next year. That represents 9,900 people added to what UHERO expects will be a workforce of 565,300 people this year.
Hawaii’s unemployment rate is expected to improve to 9.7% next year from an estimated 12.4% this year, then continue dropping to 5.0% in 2022 and 3.8% in 2023.
A 3% unemployment rate is generally considered to reflect full employment.
Last year Hawaii’s unemployment rate was 2.8%.
Hawaii’s tourism industry and main economic engine is expected to be hampered by weakness in demand stemming from reluctant travelers and would-be visitors who don’t have money for vacations because of coronavirus-related economic struggles outside Hawaii.
UHERO anticipates that the number of visitors arriving by plane will jump 74% to 4.7 million next year from 2.7 million this year after last year’s record 10.2 million visitors.
Visitor arrivals would continue rising to 7.9 million in 2022 and reach 8.9 million in 2023, UHERO predicts.
The report takes into account an Oct. 15 start for a pre-travel virus testing program, and said the major tourism gains are expected with a vaccine becoming widely available in the second half of next year.
For construction, UHERO said government contract awards have surged fivefold this year because of large military projects and that construction is the only industry avoiding job losses. On the downside, UHERO expects nonresidential construction will be hamstrung because of weak demand for retail, hospitality and office use.
In real estate, UHERO noted that sales of previously owned homes in Hawaii and residential building permits had bounced back by midsummer from declines earlier this year. UHERO also said it expects home prices will be held down by modestly higher supply and weaker demand influenced by poor economic conditions, high unemployment and people leaving the state.
In the broadest measure of the local economy, which is the value of all goods and services known as gross domestic product, UHERO expects the 1.2% gain next year after a projected 11.8% drop this year.
Measured in dollars, this year’s expected loss amounts to $11.5 billion, while next year’s projected gain would be $1 billion.
Hawaii GDP last year was $97.3 billion, and UHERO expects it to be $85.8 billion this year and $86.8 billion next year.
UHERO also expects Hawaii GDP to rise 5.5% to $91.6 billion in 2022 and then 1.8% to $93.3 billion in 2023.
Bonham said it’s been especially challenging for UHERO to predict economic changes this year because of the unpredictability of COVID-19 and responses to it from the public and government.
Another wave of local COVID-19 cases could trigger business and industry shutdowns, while economic or virus setbacks in major Hawaii visitor markets could hurt local tourism even if COVID-19 is low in the state.
Bonham said one element local residents can control is their actions that influence COVID-19 cases, which will affect where Hawaii’s economy goes.
“Without controlling the virus, we will lose the economic activity that we regain,” he said. “It depends on everybody acting together, doing our part to control the virus.”