The Champagne bubbles that marked the start of 2021 have already begun to go flat as businesses across the state hit economic plateaus.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization, said Hawaii “has likely seen the end of significant improvement in the labor market for the next several months.”
His forecast was based on UHERO’s economic pulse index, which predicts job market movements by aggregating several indicators of economic activity, tinyurl.com/UHERO-EP.
As of Jan. 16 UHERO’s economic pulse was at 42, which means that Hawaii’s economy had recovered 42% from the pandemic lows experienced during the first COVID-19 government shutdowns in April and May.
Bonham said in an email to the Honolulu Star-Advertiser that the key takeaway from the most recent economic pulse is the stagnation.
“It has essentially hovered in the 40s since the end of October,” he said.
Bonham said in a video message posted on covidpau.org that recent stability in the economic pulse index suggests that “for the first part of the year, we’re looking at a relatively stagnant or stable picture.”
Hawaii’s travel demand hasn’t returned as strongly as some had hoped when the state introduced Safe Travels Hawaii, a travel entry program aimed at creating a safe way for travelers to return to Hawaii.
Beginning Oct. 15, Hawaii allowed trans-Pacific and inter-county passengers to bypass the travel quarantine if they had a valid negative COVID-19 test from one of the state’s trusted testing partners. However, COVID-19 fears and surges as well as government restrictions have tempered travel demand for Hawaii.
November, the first full month that travelers to Hawaii could arrive without quarantining, brought just 183,779 visitors, compared with 809,076 in November 2019.
Starting Nov. 6, travelers from Japan could participate in Safe Travels. But only 524 came in November, partly because Japan still required that most Japanese travelers to Hawaii quarantine upon their return home.
The first 11 months of 2020 brought only 2.48 million visitors to Hawaii, a 73.7% drop from the 9.43 mil- lion who came during the same period in 2019.
Bonham said Hawaii will need to keep the Safe Travels program open, while still emphasizing public health, to avoid backsliding into tighter travel restrictions.
“The increasing case counts that we’ve seen over the last several weeks are a concern,” he said.
Bonham said rising case counts hamper economic recovery even if the state and counties don’t change policies or tiers or enter into lockdowns. As coronavirus cases rise, Bonham said, people begin to reduce their economic activity, translating into “additional job losses, which means other people not going back to work, lost income, and it hits us directly in the pocketbook — so controlling that is really paramount, and keeping the Safe Travels program working is really paramount.”
From the pandemic’s start to Jan. 8, the state Department of Labor and Industrial Relations estimates, 575,352 unemployment claims were filed. From Jan. 4-8, DLIR’s unemployment insurance call center was still averaging 2,149 calls per day.
“What we need is a plan to bring tourism back safely. If it’s just locals, it will keep you floating for a while, but you aren’t making the funds that you need to sustain your business,” said Ernie Kanekoa, who along with his partner, Carolyn Fredrickson, made the difficult decision to close their Kauai restaurant, Kalaheo Steak & Ribs, in July. Kauai has the strictest travel restrictions in the state.
Kanekoa said he and Fredrickson tried everything they could to keep their 2-decade-old restaurant open. Each time COVID-19 restrictions hit, the pair changed their business model, Kanekoa said. They received federal stimulus as part of the payroll protection program but were able to keep their employees on only through June.
Revenue declines related to Kauai’s tourism and economic downturn, coupled with soaring prices — like meat, which went from $850 a case to $1,200 — meant there still wasn’t enough left to pay bills, taxes or employee benefits, Kanekoa said.
“I had forecast 2020 would be pretty good for us due to new contracts with conventioneers. But it didn’t turn out that way. It was like watching something out of a pandemic movie — everything bad just kept unfolding,” Kanekoa said. “I felt bad that we couldn’t hold on longer. When I saw all the other businesses closing, I knew that we had made the right decision to close before we got into more debt.”
From the start of the new coronavirus, states and counties across the nation have struggled to balance public safety needs against the need to keep the economy open. Balancing these competing interests is challenging, said Mike Turner, director of sales and marketing for Kauai Shrimp, which has experienced pandemic-related business challenges across the globe.
“There’s nothing extra special about Hawaii when it comes to this disease,” Turner said. “The struggle to balance is everywhere, and it’s the same story.” Turner said Kauai Shrimp kept its workforce going by pivoting to the retail side after experiencing an 80% drop in wholesale sales when restaurants and hotels in Hawaii and elsewhere closed in March.
Coronavirus-related freight challenges also led to losses, he said.
“We lost a $120,000 load this December when the UPS plane was backing off the gate in Honolulu and the pilot and co-pilot both tested positive for COVID. The shrimp was a complete loss. It’s certainly been a huge challenge,” he said. “It’s not for the weak of heart.”
Turner said the company’s performance has fluctuated along with Hawaii’s tourism-dependent economy, which will need to improve for businesses to have a sustainable future.
“We noticed an uptick when assistance money was available and when people were getting the $600 weekly plus-up in their unemployment checks,” he said. “It helps when restrictions are offset by economic stimulus. We also have to find a way to reopen tourism safely.”