Economic recovery rosy with billions in federal aid set to roll into Hawaii

Hawaii’s economic recovery is looking up, with billions in additional federal aid set to pour into Hawaii this year and the pace of vaccinations picking up, Carl Bonham, executive director of the University of Hawaii Economic Research Organization, told lawmakers Monday.

Bohham said the value of all goods and services produced statewide, known as the gross domestic product, or GDP, could return to pre-pandemic levels by the second or third quarter of next year.

“It’s nice to be optimistic for a change,” he said during a hearing before Hawaii’s House Select Committee on COVID-19 Economic and Financial Preparedness.

Hawaii’s congressional delegation estimated that the state could receive more than $6.1 billion from the American Rescue Plan Act, which was signed into law by President Joe Biden this month. Bonham said that it could be as much as $7 billion to $8 billion when direct payments to households and child and earned income tax credits are factored in.

“All of this is having an enormous impact,” he said.

The massive infusion in federal dollars is expected to provide a bridge until Hawaii’s tourism-dependent economy fully recovers. Visitor numbers have continued to increase under Hawaii’s Safe Travels program, with this month’s visitor numbers expected to be about 40% of what they were in March 2019.

Hawaii largely shut down travel in March 2020, requiring a mandatory 14-day quarantine for anyone arriving in the islands. The state began lifting restrictions under its Safe Travels program in mid-October, allowing visitors and returning residents to bypass quarantine requirements if they show proof of a negative COVID-19 test from a state-approved partner. The travel restrictions have been successful in keeping coronavirus cases at bay, data suggests.

Hawaii was averaging about 97 new coronavirus cases daily before the launch of the travel program. The recent average is about 53 cases a day, despite the uptick in visitor numbers.

The economic recovery projections are much rosier than this time last year, when UHERO estimated that it could take several years to recover from the painful disruptions to the economy.

But there’s still a way to go. About 67,000 people remain unemployed in Hawaii, which has consistently had the highest unemployment rate in the country. The state’s unemployment rate was just 2% in January 2020. It soared to 21.9% in April. In January it was 10.2%. California had the second-highest unemployment rate in January at 9%.

Hawaii’s economic plunge was dramatic, with major sectors losing double the number of jobs than the national average. For instance, 18% of jobs in the accommodations and food services were lost nationally in 2020. In Hawaii the rate was 39%, according to UHERO. Transportation job losses stood at 2% nationally last year, while in Hawaii they were a staggering 23%.

The pandemic has brought a renewed spotlight on Hawaii’s dependence on tourism. As the government shut down travel last year and imposed restrictions on businesses and gatherings, local residents suddenly got to experience relief from traffic congestion, tourist-free beaches and sparks of environmental recovery as fish returned to Hanauma Bay and monk seals and turtles hauled up on beaches.

The perks of a tourist-­free Hawaii renewed calls from residents and top lawmakers to push for a greater diversification of the local economy and restraints on Hawaii’s visitor industry. But there’s no sign that Hawaii will move away from its dependence on tourism anytime soon, despite Gov. David Ige’s call for pivoting toward a more robust digital economy, what he’s calling “Hawaii 2.0.”

Leaders in the Legislature are depending on tourism to bring back jobs and state revenues to pre-pandemic levels. That recovery is dependent upon Hawaii continuing to drive down coronavirus cases. So far, about 28% of the state’s population has received at least one dose of a vaccine, and about 17% of the population is fully vaccinated. The weekly delivery of corona­virus vaccines is expected to increase, and Lt. Gov. Josh Green is pushing to open vaccinations to residents 16 and older by May 1.

Hawaii’s successful rollout of vaccines is heightening expectations that the state could begin issuing “vaccination passports” soon and tourism could quickly bounce back to 2019 levels.

“The No. 1 thing that can derail us at this point is a surge in cases with new variants that slows the progress of tourism,” said Bonham.