HONOLULU (KHON2) — Hawaiʻi’s economy continues to recover despite a possible economic recession that is making its way across the United States.
According to the State Department of Business, Economic Development and Tourism, they project Hawaiʻi to see an economic growth for the next two years.
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The projected growth rates are better than the expected growth rates for the rest of the country.
According to DBEDT, the areas showing improvements during the first four months of the year are as follows:
Areas showing improvements during the first four months of 2023 include:
- The continued declining inflation rate. Consumer inflation, as measured by the growth of the consumer price index (CPI) for urban consumers in Honolulu, dropped to 3.3 percent in March 2023 from 5.2 percent two months ago.
- Continued recovery in tourism. During the first four months of 2023, visitor arrivals recovered to 97 percent compared with the same period in 2019 and visitor expenditures, as measured by nominal dollars, were 22 percent higher compared with the same period in 2019. After adjusting for inflation, real visitor spending was higher than the pre-pandemic level.
- Stronger construction activities. The value of private building permits authorized during the first four months of 2023 increased by 7.7 percent as compared with the same period a year ago. Permit value for additions and alterations increased by 24 percent and permit value for commercial and industrial projects increased by 11.3 percent, while residential construction value decreased by 3.9 percent during the first four months of 2023. The construction job count increased by 4.9 percent during the same comparison period. Government contract awarded totaled $3.2 billion during the first quarter of 2023, of which $2.8 billion was awarded to Hawaii firms for Pearl Harbor Naval shipyard replacement project.
- Improved labor market conditions. During the first four months of the year, the labor force (not seasonally adjusted) recovered to 98.9 percent and employment recovered to 98.6 percent compared with the same period in 2019. The non-agriculture payroll job count recovered to 96 percent of the pre-pandemic level. Average weekly initial unemployment claims were 1,148 during the first four months of this year, lower than the average of 1,267 during the first four months of 2019.
- Continued increase in state general excise tax revenue. As a comprehensive measure of business activity, the state general excise tax (GET) increased 9.8 percent during the first four months of 2023 as compared with the same period a year ago. The highest historical monthly GET collection was $440 million in January 2023, with the second highest historical GET collection in April 2023 at $413.1 million.
Areas of concern include the following:
- U.S. and world economic slowdown in the next few years. Most of the countries, especially North America and Europe, will experience an economic slowdown in 2023 and 2024.
- Continued Ukraine War. The Ukraine War created a high degree of uncertainty, and the war has no sign of ending anytime soon.
- High interest rates and mortgage rates. Due to high interest and mortgage rates, the number of residential home units authorized decreased by 22.2 percent during the first quarter of 2023. The number of home sales decreased by 38.8 percent during the first four months of 2023.
- Labor shortage accompanied with higher unemployment. Job vacancies remained higher during the first quarter of 2023 with an average of 13,000 positions unfilled per month during the first quarter of 2023. By comparison, the average of monthly vacancies in 2019 was 7,500. The unemployment rate for the first quarter of 2023 (3.1 percent not seasonally adjusted) is the same as the first quarter of 2022 and remains higher than Hawaii’s average unemployment rate of 2.5 percent for the period 2017-2019.
- Slow growth in population. Hawaii has experienced a net out-migration in the past few years. According to the U.S. Census Bureau, Hawai‘i lost over 15,000 in resident population between April 2020 and July 2022, with the majority of the loss due to movement between Hawaii and the U.S. mainland.
- Increased bankruptcy filings. After four years of consecutive declines, bankruptcy filings increased by 7 percent during the first four months of 2023.
According to DBEDT, as of the end of 2022 — based on the data available on real domestic product — real GDP recovered by 95.2 percent as compared with 2019.
Real GDP in tourism related sectors — transportation, retail, arts, entertainment and recreation, accommodation, and food services — recovered at 83.8 percent while non-tourism sectors recovered at 98.7 percent.
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The total non-agriculture payroll job count recovered 98.9 percent in 2022 and the unemployment rate in 2022 which was 3.5 percent not seasonally adjusted was one percentage point higher than the level in 2019 which was 2.5 percent.