UH study says Hawaii economy shows signs of growth

Last fall, the University of Hawaii Economic Research Organization predicted a recovery beginning sometime this year. On March 26, the organization declared in its annual forecast, "Hawaii's economic recovery has begun. … Employment is stabilizing and many sectors will begin to add modest numbers of jobs as the year progresses,” the report said.

“Visitor arrivals and spending will continue to firm up along with economic conditions in our major tourism markets. Private construction is bottoming out, and the sector will begin to see more benefit from Federal and State spending programs,” the economists said.

Although Hawaii’s economy is starting to show signs of growth, cuts in spending by the state and county governments will be a drag on the state economy this year, according to the report. After experiencing severe job losses in the early part of 2009, some sectors began to see job growth in the fourth quarter, while others saw growth during the first months of this year, it said.

However, the annual figures for 2010 likely will still show a net decline because the job counts for 2009 were low, according to the report. Payroll jobs fell by 4.4 percent in 2009, and are forecast to decline by 0.8 percentage points in 2010. The state’s unemployment rate, 6.8 percent at the end of 2009, is forecast to rise slightly to 6.9 percent in 2010.

Nationally, the economy has continued its slow growth, but harsh snowstorms crimped activity along the East Coast last month, according to the Federal Reserve’s Beige Book survey, released on March 3. It said the nation's recovery is managing to plod ahead, though not at a strong enough pace to persuade companies to ramp up hiring. The Fed said "economic conditions continued to expand ... although severe snowstorms in early February held back activity" in some places.

"We're still talking about relatively slow growth, a modest recovery that's nothing to get real excited about," said UHERO Executive Director Carl Bonham. "It's the first quarter where we've seen any growth in quite a long time."

Construction jobs should see a boost this year with public-sector contracts, as Hawaii begins feeling the effects of federal and state stimulus funding, according to the report. Government contracts awarded will rise from $779 million last year to about $1.6 billion this year before dropping back off.

None of the projects includes the city's rail transit plan, since schedules for that work have not yet been finalized. The report sees the unemployment rate staying at 6.9 percent but possibly falling 0.5 percent in 2011.

Additional government job losses are likely, but that does not necessarily mean layoffs. "Some of them will be retirements," Bonham said. "There's still continued cutting of budgets by the state. That will result in attrition. Furthermore the counties are just now looking at their fiscal issues."

The visitor industry might see more tourists from Asia but a flat market from the U.S. mainland, particularly the West Coast, Hawaii's largest tourism market. As of January, California's unemployment rate was 12.5 percent. Bonham said jobless rates are a proxy of consumer confidence. Visitor spending took hits because of discounting in the tourism industry. Lower prices might continue, but returning demand is beginning to support higher prices and spending, the report states.

Hawaii's job losses may have been severe, but personal income did not take big hits, largely because of increased unemployment benefits from the federal government. Total real personal income actually rose by 0.2 percent in the first three quarters of last year, but it was a symptom of the recession. There was a 239 percent surge in unemployment compensation.