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Economic Currents

Keep up to date with the latest UHERO news.

UHERO 101.7: School's Out, Unemployment Up?

Posted August 5, 2013 | Categories: Hawaii's Economy, Blog

Last week's Star Advertiser reported that Honolulu’s unemployment rate increased from May’s 4.0% to 4.7% in June. Is the local labor market in free-fall? Not exactly. When students graduate or are released for summer break, many of them start searching for employment. Suddenly the labor market is flooded with thousands of additional young men and women; some looking for their first full-time positions and others looking to earn spending money to bring back to school in the fall. Since not all of them find employment immediately, this often contributes to a noticeable uptick in the unemployment rate from May to June both locally and nationally. The reverse often occurs in August and September as students return to classes and exit the labor force. This is just one example of a seasonal fluctuation that can make it difficult to assess the current state of the economy. How can we tell what part of the uptick in the unemployment rate is due to regular seasonal events and what part, if any, is due to changes in underlying economic conditions? Is there a better way for us to see if the economy is on the right track and whether job seekers are getting matched up to the supply of jobs?

Rather than comparing unemployment rates directly across months, adjustments can be made to the data to remove predictable and consistent seasonal effects, the ones that happen every year (like summer vacation and Christmas), from the data. When we observe a seasonal trend that happens at the same time every year, we can use seasonal adjustment, a statistical method, to adjust the data and strip out seasonal fluctuations. The resulting seasonally adjusted series contains fluctuations that are due to factors other than regular seasonal patterns. This way unemployment rate data can be meaningfully compared across different months, and can give us a better indication of the health of the job market.

While the BLS seasonally adjusts national and state unemployment rate they do not provide this adjustment for metropolitan areas or counties. UHERO has developed techniques for seasonally adjusting unemployment rates for Honolulu as well as Hawaii’s three neighbor island counties. According to UHERO’s estimates, after removing the seasonality associated with increased summer demand for jobs, June unemployment in Honolulu actually fell from 4.1% in May to 4.0% in June.

 

--Kimberly Burnett and James Jones


UHERO 101.6: Recession Dating

Posted July 26, 2013 | Categories: Blog

While the U.S. economy has been out of the last recession since the summer of 2009, a new poll found that a majority of people (54%) thinks the country is still there. How are these things measured, and who decides when a recession starts and ends?

The National Bureau of Economic Research (NBER) Business Cycle Dating Committee was created in 1978 to formally determine and announce peaks and troughs in economic activity. While the popular press often states the definition of a recession as two consecutive quarters of decline in real GDP, the Dating Committee’s procedure for identifying recessions differs in several ways. The committee uses a range of economic indicators in addition to GDP, such as employment and personal income, to determine periods of expansion and contraction, and pays particular attention to monthly indicators.

Aside from the duration, the depth of the decline in economic activity is also an important factor in recessions. The Committee waits until the existence of a peak or trough is not in doubt, and until it feels confident about assigning an accurate date to those limits. It then pronounces the time between the peak and trough a recession. For example in the last recession, the Dating Committee's determination of the December 2007 peak and the June 2009 trough dates occurred 11 months and 15 months later, respectively.

 

 

---Kimberly Burnett 

 


The Impact of Marriage Equality on Hawai′i’s Economy and Government: An Update After the U.S. Supreme Court’s Same-Sex Marriage Decisions

The U.S. Supreme Court’s decisions in the two same-sex marriage cases have substantially increased the short-term and medium-term benefits that could accrue to Hawai‘i if the Hawai‘i State Legislature enacts legislation allowing same-sex marriages to begin in Fall 2013 or early in 2014. Our updated report comes to the following conclusions.

  • The U.S. Supreme Court’s decision to overturn California’s Proposition 8 and allow same-sex marriages to resume again in California has massively increased the potential gains to the state’s tourism industry from same-sex couples visiting Hawai‘i either to marry or to honeymoon and from guests attending their weddings or marriage celebrations. This is because marriage equality in California increases the proportion of Hawai‘i’s visitors from states with marriage equality from 18 percent to 54 percent. We estimate $166 million in additional spending over the 2014-2016 period from marriages and honeymoons of same-sex couples visiting from states with marriage equality.
  • The U.S. Supreme Court’s ruling in the DOMA case has opened the door to a limited set of federal rights for all same-sex couples regardless of whether they live in a state with marriage equality. Some same-sex couples from states without marriage equality now have incentives to travel to another state to marry and honeymoon. Some of these couples would choose to marry and/or honeymoon in Hawai‘i if same-sex marriage were legal in Hawai‘i. Including spending from marriages and honeymoons of same-sex couples from states without marriage equality increases total additional spending to $217 million over the 2014-2016 period.
  • We estimate that marriage equality in Hawai‘i will increase State of Hawai‘i and City and County of Honolulu general excise tax revenues by $10.2 million over the 2014-2016 period. State income tax revenues would also increase, but we have not estimated their magnitude.
  • Without access to marriage in Hawai‘i, local same-sex couples can only gain access to federal marriage rights by traveling to the U.S. mainland to marry. This reduces same-sex couple spending in Hawai‘i, harms the Hawai‘i wedding industry, and raises the cost to many Hawai‘i same-sex couples of becoming married.
  • Marriage equality in Hawai‘i would lead to substantial federal tax savings for married same-sex Hawai‘i couples with a spouse as a beneficiary on the other spouse’s employer-paid health insurance. Marriage equality would also allow married Hawai‘i same-sex couples to become eligible to draw spousal benefits from a number of federal programs, including social security.

--Sumner La Croix 
and Lauren Gabriel 

RESEARCH PAPER


UHERO 101.5: Much Ado about Student Loans

Posted July 5, 2013 | Categories: Blog

How will college students around the country be affected by the latest policy change regarding interest rates on student loans? Rates on subsidized Stafford loans, which account for about 25% of all federal student loans, increased from 3.4% to 6.8% for new loans beginning this week. How big of a blow is this to future borrowers? To get an idea of the magnitude of this policy change, we calculated the increased monthly payment and total interest payment on the maximum subsidized Stafford loan amount of $23,000. Keep in mind that the higher rates apply only to subsidized Stafford loans. In 2011 the average borrower graduated with approximately $27,000 in student loans.

Under the new interest rate of 6.8%, a student taking out the maximum Stafford loan would now face a monthly payment of $265, a $38 monthly increase from the old policy. Over ten years, the student would be burdened with a total interest payment of $8,760, approximately $4,600 more than the total interest payment under the old rules. The extent to which the increased interest rate on subsidized Stafford loans will affect college-bound students will depend on their success in the job market following college and their subsequent ability to pay back the loan in a timely fashion.

Kimberly Burnett and James Jones


US Marines Moving From Okinawa - Pacific Beat Interview


The United States announced plans on June 20 to move about a quarter of the ~20,000 US marines based in Okinawa to Guam, Hawaii, the US mainland, the Philippines, and Australia over the next 13 years. Are those plans still moving forward?

Yes, they are, but an editorial in last week’s People’s Daily, a leading Chinese newspaper, added some uncertainty to the situation.  In the editorial, the legitimacy of Japan’s rule over the entire Ryukyu Island chain was questioned.  Okinawa is part of the Ryukyu island chain and it is certain that this Chinese government-sanctioned editorial did not go over well in Tokyo or Washington. If this type of rhetoric continues, Tokyo may well want the Marines to stay in Okinawa.

 
What do we know about the relocation to Hawaii?

Between 1,000 and 2,700 of the 4,700 marines being moved will likely end up on the island of Oahu.  The U.S. Dept. of Defense has commissioned three separate studies to evaluate several potential locations to house the marines.

They include the already crowded Marine Corp Air Station in Kaneohe Bay.  It currently houses 7,500+ marines.  Considerable new construction would be needed.  There could also be stress on training facilities in the vicinity.

Camp Smith, near Pearl Harbor, houses 1,700+ marines but they are mostly associated with the Pacific Command.  Housing relocated marines there is unlikely.

 

What about the other two locations?

Two other possible locations are the decommissioned Naval Air Station Barbers Point and Pearl City Peninsula.

Pearl City Peninsula is a lightly developed residential peninsula that pushes out into the center of Pearl Harbor.  It’s a good location but environmental and cost considerations could make it an expensive choice.

The decommissioned Naval Air Station Barbers Point is more intriguing.  At the end of the cold war, the Base Realignment and Closure Commission (BRAC) recommended its closure in a 1993 report and the base closed in 1999.  Since then efforts to redevelop the closed base have been a total failure.  

This location certainly has a lot of potential, but also would require major investment.  It does have an airstrip that could be brought back into use, but almost all other facilities would need to be built from scratch.  Whether Congress would want to spend the kind of money needed to bring this closed base back to life is unclear.

 

Where’s the marine relocation on the Hawaii political radar?

The story has not been extensively covered in Hawaii’s newspapers and media and so there has been little public discussion of the topic. Hawaii’s governor, congressional delegation, policymakers and legislators must surely be talking about it, as it has considerable potential to generate more medium-term construction spending. That’s important, as the Hawaii construction industry has been slow to recover from the 2008-2009 downturn and still has large numbers of unemployed or underemployed workers.  

On the other hand, Oahu already hosts several military bases, and it would not be surprising to see a backlash develop against the relocation if the new housing and facilities are located on lands not currently being used by the military.

--Sumner La Croix

 

 

 


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