A reader glancing at the July 12 Advertiser headline, "Business optimism in Hawai'i still dropping" or reading the story's first paragraphs may come away believing the state is in a serious economic decline. That reader would be misled.

Although it appears later, the article acknowledges that pessimistic answers to the Business Banking Council (BBC) survey are the norm — even in times of robust growth. These cautious responses should not be taken as a dire prediction of the state's economic future.

Hawai'i has recently seen a period of growth at faster-than-sustainable rates. We are now seeing an easing in that growth to rates our resources can better accommodate.

The responses from businesses reflect our own expectation that in the next year or so Hawai'i is likely to see more normal growth. No one, however, expects a stagnant or declining economy.

Even modest growth is a huge improvement over the state's dismal economic situation through the 1990s. In 2002, Forbes magazine called doing business in Honolulu "nearly equivalent to suicide." Since then, Hawai'i has gone from the bottom of Forbes' ranking of state business climates to 37th, up five spots from last year. This is a remarkable improvement over a short time, due in large part to our administration's efforts.

Overall, Hawai'i's economy is very healthy and, adjusted for inflation, will grow at an estimated 2.6 percent this year, versus 2.7 percent last year. It is expected to grow 2.5 percent next year. Personal income — the money that our people earn and have to spend — increased 6.1 percent in the first quarter of 2007 and is expected to end this year up 6.3 percent over 2006. Total value of new private building permits increased 8.0 percent in 2006, suggesting the continuation of strong construction activity. All this is continued growth and at a healthy rate.

The Advertiser story cited survey results showing the biggest problem reported by businesses being rising costs in a variety of areas, from property taxes to energy. We also know that strong consumer spending and creation of 60,000 new jobs over the past four years have pushed the state's unemployment rate down to the lowest in the country — an average 2.3 percent.

The best solution to rising costs, especially in an island economy, is achieving greater productivity through the application and adoption of innovation. Our labor shortage cannot be resolved by importing workers; we need a workforce equipped with the skills needed by our businesses. In the BBC survey only 3 percent of businesses polled said the high school graduates they hired are well prepared for the workforce. In a rapidly changing global economy, those skills include "out of the box" thinking applied to every job.

This is why innovation in education and workforce development is so crucial to increase productivity and ensure continued growth in our healthy economy. We must continue the efforts to develop the next generation of workers with creativity and critical thinking skills gained through exposure to science, technology, engineering and mathematics education.

Far from a pessimistic picture suggested by The Advertiser story, the state's future looks bright.

Theodore E. Liu is director of the state Department of Business Economic Development and Tourism. He wrote this commentary for The Advertiser.