(Star-Advertiser) Hawaii economists say slower growth is ‘new normal’ for islands

Hawaii economists say slower growth is ‘new normal’ for islands

(Source Star-Advertiser)

University of Hawaii economists say the state’s slowing growth is becoming more entrenched and people had better get used to it.

Visitor days, the length of time visitors stay in Hawaii, are below last year’s peak, while spending by tourists is falling, job growth is largely stalled and income gains are receding.

“At best this represents a new normal for Hawaii,” according to a report released Friday by the University of Hawaii Economic Research Organization.

UHERO said recent data confirm the significant broad-based slowing that it forecast in its first-quarter report in March. The researchers said while tourism can expect a partial recovery from weak recent conditions, the industry’s long period of robust expansion is over and further gains will be incremental at best.

“The recent pullback of visitor spending signals substantial risks to the downside, depending on things largely outside our control: the external environment, currency movements, and changes in visitor sentiment,” UHERO wrote.

In addition, UHERO said that slowing is not just relegated to the visitor industry but extends across much of the local economy.

“Local demand has eased off the healthy pace we saw during the recovery phase, and a dearth of population growth will impose structural limits going forward,” UHERO said. “Even if the unemployment rate has eased from record lows, the workforce is simply not there to drive strong ongoing expansion. Hawaii needs to get used to a modest pace of job and income growth.”

UHERO said tourism softness is a real concern but that new flights by Southwest Airlines should help boost visitor arrivals by 2.3% this year — up from last quarter’s forecast of 1.7% — before decelerating to just a 1% increase by 2021. The economists said the visitor industry started out roughly on par with year-earlier levels, but is 2% below last summer’s peak as measured by visitor days.

The economists said visitors have been spending less over the past year, which suggests that broader concerns about the U.S. and global economies may be having an adverse impact in Hawaii. They said visitor spending looks “considerably worse” after lower hotel occupancy pulled down inflation-adjusted revenue per available room by 5% in the first quarter.

“Overall real (inflation adjusted) visitor spending has been on a downward trajectory since last spring and ended the first quarter about 4% lower than a year ago,” UHERO said. “On a per-person basis, inflation-adjusted spending has now slipped to levels not seen since 2010.”

UHERO said that job growth, which rose a mere 0.5% last year, will be only slightly better this year and through 2021 with projected gains of 0.7%, 0.7% and 0.5%, respectively. It said that construction jobs have plateaued with the number of jobs hovering near 36,000, about 2,400 jobs below the mid-2016 peak.

Inflation-adjusted personal income, which rose just 0.9% in 2018, is projected to rise 0.8% this year, 1.1% in 2020 and 1% in 2021. Hawaii had the slowest income growth in the nation last year, according to the U.S. Bureau of Economic Analysis. The weakest sectors included government, construction, trade, and the finance and real estate industry.

GDP — the production of all goods and services — is seen rising an inflation- adjusted 1.1% this year, slightly better than the 1% that UHERO projected in its last report. The projection for 2020 and 2021 is 1% and 1.2%, respectively.

The economists kept their projection for housing prices roughly in line with their previous report and forecast small increases. They project the median price for single-family homes to edge up just 2% this year to $803,800, 2.4% in 2020 to $823,500 and 1.5% in 2021 to $835,800. The median price for condos is projected to end this year up 3.2% at $433,000, rise 5.6% in 2020 to $457,200 and increase 2.3% in 2021 to $467,700.

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