Hawaii economy likely to be rough for at least 2 more years
By Greg Wiles
Advertiser Staff Writer
Hawai'i's economic tough times figure to continue into next year, according to the most recent forecast from University of Hawai'i economists.
The report, titled "After Sharp Drop, Recovery Will Take Time," said the economy will bounce back but probably not this year or next.
The University of Hawai'i Economic Research Organization said visitor arrivals, a key indicator for the state, will decline or flatten through 2010 and unemployment will rise this year and next.
"The next several years will be difficult ones for Hawai'i's businesses and households," said the report, which projects a deeper downturn than the UHERO forecast published in November.
"The visitor industry will languish as the deepest global recession in decades continues to undermine travel demand," the report said.
The cloudy outlook follows a worsening of forecasts for the U.S. and Japanese economies, which are also in recession. UHERO noted the credit crisis and collapse in consumer confidence had turned a mild U.S. downturn into a deeper problem and that Japan's economy will also see a steep contraction this year.
"This was a very sharp downturn," said Carl Bonham, UHERO executive director, noting a decline in jobs last year and projected declines this year and next.
"It's consistent with the very rapid increase in unemployment."
According to the forecast:
Unemployment will average 7 percent this year (up from the 4 percent average in 2008), and rise further in 2010. UHERO said the state's jobless rate will peak during the July-September quarter of next year and remain above 6 percent for several years.
"This is a severe and lengthy jobs drought by historical standards," the forecast said.
"The state's fiscal crisis is likely to result in government job cuts as well."
THE GOOD NEWS
Not all the projections were bad in the report, which estimated a cooling of inflation and points to a boost from the federal stimulus plan over the short-term. UHERO noted the national economy should reach bottom later this year, and that Hawai'i may, too.
"If we stabilize the financial markets, the economy will bottom out this year, and we'll begin to see some growth next year," Bonham said. "There's some evidence that not as many people think the economy is going to fall apart as just a few months ago."
The state's own efforts to inject money into infrastructure projects along with the O'ahu mass-transit project should provide help over the medium-term, the report said.
Moreover, UHERO's unemployment rate forecast shows the Hawai'i number lower than what some economists are projecting for the nation as a whole.
The forecast was delivered with a caveat given the uncertainty that's surrounded the past year's economic turbulence. Bonham said economists had a difficult time last year giving forecasts because of the rapid downturn.
He said forecasters could be wrong in predicting a gradual recovery beginning sometime next year, and that the possibility exists a rebound might be bigger than what's seen now.
Reach Greg Wiles at gwiles@honoluluadvertiser.com.
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