Growth forecast for state stays flat

The state maintained its 2.3 percent growth forecast for Hawaii’s economy this year and raised its projection for visitor arrivals but said it expects tourists to spend less in 2016 than previously anticipated due to the strong U.S. dollar and the weakening of foreign currency.

In its initial quarterly forecast for 2016, the state Department of Business, Economic Development and Tourism said Thursday that it sees visitor arrivals rising 1.9 percent this year to 8.8 million, a fifth straight record, and projects visitor spending to rise 2.4 percent this year to $15.6 billion, which also would set a record. In November DBEDT forecast visitor arrivals to increase 1.7 percent and visitor spending to rise 3.5 percent in 2016.

DBEDT chief economist Eugene Tian said he doesn’t see the Japanese market improving much this year even though that country’s currency, which trades now at about 112 yen against the U.S. dollar, has strengthened about 8 percent in the last two weeks from 121.14 yen, and about 11 percent since June 5, when it was at a 52-week high of 125.63 yen.

Japan, the state’s largest international market, was one of the drags on Hawaii tourism in 2015 with visitor arrivals from that country down 0.8 percent and visitor spending off 9.8 percent due to the weak yen.

“We expect the Japanese market to be flat this year in terms of visitor arrivals, but the expenditures to not decrease by as much as last year,” Tian said. “The yen is getting stronger, but the other currencies are getting weaker, like the Canadian dollar, the euro, the Australian dollar, the Chinese yuan and the Korean won.”

Besides a record 2015 for tourism, the state is coming off a year in which it hit new thresholds on several other fronts. Hawaii’s unemployment rate of 3.7 percent in 2015 was the lowest since 2007. The average 676,300 people in the labor force, which includes people who are employed and people who are unemployed but actively seeking work, was an all-time high. And the average 651,350 people employed in Hawaii also was a record.

The construction industry had the highest job growth among all the industries in the state last year at 5.7 percent. Future construction activity, as measured by the value of building permits issued, looks promising for this year with the total value of private building permits issued last year increasing 19.6 percent from 2014. The biggest gainer was the value of residential building permits, which jumped 67.5 percent.

“We are pleased that Hawaii ended 2015 with the historical high levels for labor force, employment and job count, and are excited to see the trend continue in 2016,” DBEDT Director Luis P. Salaveria said. “The state’s unemployment rate was the sixth lowest in the nation, and the economic fundamentals remain positive.”

Initial unemployment claims in 2015 fell 18.4 percent to 1,322 claims per week compared with 1,620 claims per week in 2014. That trend continued last month as initial unemployment claims plunged 31.4 percent from the year-earlier period. DBEDT is projecting a unemployment rate this year of 3.5 percent, an improvement from the 3.7 percent it forecast in November.

Hawaii’s inflation-adjusted gross domestic product — the broadest measure of economic output — is expected to keep pace with the U.S. rate and grow 2.3 percent this year and 2.4 percent in 2017. These growth rates are similar to the U.S. economic growth as seen by the 50 top economic forecast organizations and published in Blue Chip Economic Indicators.

“The Hawaii economy is the same as last year,” Tian said. “The fundamentals have not changed, so the growth is similar to the U.S. at between 2 and 2.5 percent. That is healthy growth.”

Tian said DBEDT made small adjustments to some of its forecasts but kept the economic growth projection the same as in its November’s report because of ups and downs that cancel each other out.

“We have smaller visitor spending but we have increased job count,” he said.

DBEDT expects payroll jobs to grow 1.3 percent this year, up from 1.2 percent in its November forecast. Inflation-adjusted personal income was kept the same at 3 percent, while the inflation rate forecast was lowered to 2 percent from the previous forecast of 2.3 percent due to the continued expectation of lower oil prices.