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Economic Currents

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Q & A: Positive Outlook on Hawaii Economy

Posted May 11, 2012 | Categories: Q&A
1.UHERO released its second quarter State forecast update—"Visitor Industry Still Leading Recovery". How strong is the visitor industry recover?

In the first quarter of 2012, the total number of visitors to the state surged 8.5% above previous-year levels. Visitor days rose more than 9%, and spending is up more than 14%. We are forecasting a little more than 5% arrivals growth and almost 13% spending growth for the year. We expect arrivals growth rates to slow in part because of headwind from high energy prices, but also because late in the year we will be making comparisons to the very strong Fall and Winter of 2011.

2. Thats good news, but your report points out that most of the growth in the state is confined to the visitor industry?

That is true, accommodation and food service jobs have seen the strongest growth. Jobs in the sector were up 4.6% in the first quarter, with strength in both the lodging and restaurant components. We expect this sector to grow by almost 4% during 2012, coming very close to the 2007 peak of 98,400 jobs. The other sectors linked most directly to tourism have seen much smaller gains; retail trade and transportation and warehousing were up just 0.7% and 0.8%, respectively. Just like the national picture, Federal, state and local government sectors continue to shed jobs. Tourism continues to be the primary engine of that recovery, and this will continue to be a source of growth, supported by the recent resurgence of non-traditional markets. As the two millstones around Hawaii’s neck—construction and government— lighten this year, employment gains will strengthen and touch more sectors of the local economy. Overall, we are forecasting non-farm job growth of 1.5% in 2012 and similar growth for real personal income. By 2013, the economy should be growing between 2 and 3%, and the unemployment rate approaching 5% by the end of the year.

3. You continue to report that you are also looking for improvement this year. Why is that?

The main reason is that we are seeing signs of strengthening in the US economy. The private sector has had an uninterrupted streak of job gains for the last two years (check out the UHERO website for an interesting blog post on this topic), and that is contributing to rising consumer confidence, and reasonably strong consumer spending despite the relatively high energy prices and the slow motion train wreck in Europe. Last year, US recovery faltered because of high oil prices, Washington gridlock, and supply disruptions from the Japanese quake. While this spring and summer we still face high energy prices and a drag from the European recession, the US economy is stronger and will support continued recovery in mainland visitor travel. Better overall consume confidence in Hawaii will also help to spread the visitor gains to other sectors.

-- Carl Bonham

 

 

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