“As with the rest of the United States, Hawaii’s economy contracted in 2008 and looks to be heading into further decline in 2009,” states Mark Miller, Matson’s general manager, market planning. “Hawaii’s economic descent was already evident prior to the fourth quarter of 2008, but the rapid deterioration of financial markets and the global economy late in the year exacerbated what might have been a normal cyclical decline. Many fundamentals remain solid for Hawaii including sustained federal defense-related activity and low exposure to sub-prime mortgages, but the current global economic situation will overshadow them.”
For 2009, most Hawaii forecasts call for continued declines in tourism, jobs and real personal income. The recent reduction of wealth and discretionary spending accompanied by tremendous economic uncertainty will not encourage tourists to come to Hawaii for awhile nor will they stimulate external investment in Hawaii real estate. Before this situation emerged, Hawaii already had encountered several setbacks in 2008, including:
- The shutdown of Aloha Airlines and ATA along with a 20% air seat capacity reduction from the mainland. The exit of two cruise ships added to the loss of tourist capacity.
- Record high oil prices for most of the year
- Falling residential investment and the winding down of the local construction cycle
- Job losses at several key Hawaiian companies
Hawaii unemployment continues to rise, 5.5 percent in December 2008. This was up 2.4 percentage points from a year earlier and twice the rate just 16 months before. Related to this, total payroll jobs are expected to show no growth when the final results are tallied for 2008. Real personal income is a broad measure of Hawaii’s economic health, and its growth in the first half of 2008 slowed to only 0.4 percent. With the additional turmoil in the second half, real personal income growth is expected to be -0.2 percent for the full 2008 year. Hawaii’s inflation rate has slowed a bit from 2006, however this rate is still higher than the U.S. average. With the exception of inflation, most Hawaii forecasts call for these key measures to worsen in 2009. Additionally, tourism is Hawaii's largest industry and the decline seen in 2008 is expected to continue into 2009, albeit at a slower rate of descent.
Most Hawaii forecasts do not envision a recovery until 2010. By then, the tourist industry will have absorbed three consecutive years of decline, and construction may be nearing its bottom. “The beginnings of an upward construction cycle could appear after that, especially if home affordability improves,” states Miller. “However, Hawaii’s economic recovery will depend very much on the recovery of the U.S. and global economies. This includes some restoration of wealth, liquidity and confidence. All of these greatly influence the ability and willingness of consumers to spend on leisure vacations and real estate, both of which are key economic drivers for Hawaii.”
For more information about Hawaii’s economy, please refer to the following websites:
- Bank of Hawaii - http://www.boh.com/econ/512_539.asp
- First Hawaiian Bank - http://www.fhb.com/hm_econ.htm
- University of Hawaii Economic Research Organization - http://www.uhero.hawaii.edu/
- Hawaii Department of Business, Economic Development and Tourism - http://hawaii.gov/dbedt/info/economic/data_reports/info/economic/data_reports/qser/outlook-economy