The likelihood of a recession for the U.S. economy in early 2023 hasn’t dimmed prospects for Hawaii’s economy, which is still buoyed by strong tourism recovery, an improving labor market and rising state tax collections.
The state Department of Business, Economic Development and Tourism kept its growth projections for Hawaii steady at 2.6 percent for 2022 and 1.7 percent for 2023, and the department’s director said officials “are optimistic” even as the top 50 economic forecasting organizations put U.S. economic growth at 1.8 percent in 2022 and a mere 0.2 percent in 2023.
“Since the last DBEDT economic forecast in August of this year, the state’s economy has remained firm, with improvements in major indicators,” DBEDT Director Mike McCartney said in a statement on Wednesday. “Our visitor industry performance, labor market conditions, and general excise tax revenue collections are all improving. We’ve seen the construction and real estate industries slowing down in the last few months, but they are likely to improve as we enter into the new year.”
Part of the reason Hawaii’s economy may weather a coming recession, the department says, is because of tourism recovery since the start of the pandemic. During the first 10 months of this year, Hawaii welcomed a total of 7.6 million visitors, representing an 88.6 percent recovery from the first 10 months of 2019.
Visitor arrivals to Maui, Kauai and Hawaii islands have recovered over 95 percent during the first 10 months of 2022, while Oahu’s recovery was below 80 percent. Historically, about 50 percent of Oahu visitors are international visitors, and recovery in this market remains low.
Maui’s busiest months were September, when it saw 104 percent recovery compared to the same month in 2019, and April, with 103 percent recovery.
Kauai has seen the highest recovery levels in the state, with five months of this year exceeding visitor counts from the same months in 2019.
A state economist warned in September that Maui and Kauai’s reliance on the U.S. market might mean these islands could feel the effects of a U.S. recession more so than other islands.
For the time being, however, Hawaii’s improving labor market is also a good sign to economic forecasters. The state’s unemployment rate for the first 10 months of 2022 is 4 percent when adjusted for seasonal hiring and layoff patterns. While this is still the 16th highest in the state, it’s an improvement over the 6.1 percent jobless rate during the first 10 months of 2021 that put Hawaii at 12th highest in the nation.
Hawaii County has recovered the most, with 95.5 percent of the non-agriculture payroll jobs it had in October 2019 and 3,200 jobs still lost. Oahu has recovered 94 percent but still has 28,500 jobs lost, followed by Maui County at 92.8 percent recovery and 5,800 jobs still lost and Kauai County at 92.5 percent recovery and 2,500 jobs still lost.
The hospitality industry in both Maui and Kauai counties is at 90.5 percent of the total payroll jobs in October 2019, 97.9 percent in Hawaii County and 94.7 percent in Honolulu County.
Another indicator that reflects Hawaii’s current business conditions, state general excise tax revenue, is also on the rise, which is one of the factors driving state economic forecasters’ optimism. During the first 10 months of 2022, state general excise tax revenue increased 19.3 percent from the same period a year ago. This was both because of the higher inflation rate and economic growth, DBEDT said.
Despite the recovery in tourism and jobs and increase in state tax collections, one sector is starting to reflect high inflation and borrowing rates. During the first nine months of 2022, there were 17,237 homes sold statewide, a 10.4 percent decrease from the same period in 2021. Average prices were up 4.1 percent to $1,087,736 for single-family homes and up 8.3 percent to $716,065 for condos.
Of the homes sold during the first nine months of 2022, 75 percent went to local buyers and 25 percent to out-of-state buyers, the same ratio seen from 2008 to 2021.
Construction activity, meanwhile, is expected to increase with record levels of contracts awarded.
“Inflation has been trending downward since March and is expected to decrease further in the coming months,” McCartney said. “Additionally, record levels of government construction projects have been awarded during the past 10 months, and this will help the construction industry in the months to come.
“We are optimistic for the future of our economy.”
* Colleen Uechi can be reached at [email protected].