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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


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


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

 

 

 


An Insight on the Cost of Paradise

Whether visitors or residents in Hawai‘i, we are all aware of the high cost of living in paradise. One major contributing factor is the cost of energy. Households in Hawai‘i pay 4 times more than the average US household and nearly 7 times the households in Utah, where the residential energy cost is the cheapest in the nation.* While the US average for April 2013 hovered at 12 cents/kwh, Hawai‘i paid 37 cents/kwh for electricity in the residential sector.**

Breaking down residential energy consumption by source provides more insight into the high cost of living in Hawai‘i. While households in Hawai‘i supply their energy needs mainly by electricity (90%) at $110/mmbtu (equivalent to 37 cents/kwh), the two major sources in the US—natural gas and electricity—each comprise 42% of energy consumption, at roughly $5/mmbtu (equivalent to 1.7 cents/kwh) and $35/mmbtu (equivalent to 12 cents/kwh), respectively (see Figure 1). Hence, Hawai‘i is not only consuming a larger share of electricity, but also at skyrocketing prices. In contrast, the US is consuming a smaller portion from electricity at significantly discounted prices compared to Hawai‘i. This, combined with a large share of cheap natural gas in the US household consumption portfolio explains the large disparity in the cost of energy—particularly in the residential sector—in Hawai‘i and the US. Note however that switching to natural gas in Hawai‘i is not straightforward because of the logistics and infrastructure costs (liquefaction, shipping, regasification) of bringing natural gas to Hawai‘i.

 

-- Sherilyn Wee

 

 

*http://www.eia.gov/state/seds/data.cfm?incfile=/state/seds/sep_sum/html/sum_pr_res.html&sid=US **http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a


The Challenges of EV Efficiency In Hawaii

Earlier this month, U.S. Department of Energy launched a website that calculates “the cost of fueling a vehicle with electricity compared to a similar vehicle that runs on gasoline”.

The mission of this gadget is to encourage consumers to switch to electric cars by:

• bringing greater transparency to vehicle operating costs

• helping drivers determine how much they might save on fuel by choosing an electric vehicle (EV)

• showing the low and steady price of fueling with electricity.

Announcing the launch of the website, the new Secretary of Energy, Ernest Moniz, stated that EVs could not only save consumers on fuel, but also reduce the dependence of our nation on oil. Those goals may be harder to achieve in Hawai’i than in the rest of the nation.

First, according to the eGallon website, while it costs the average driver in the US less than a third to drive an EV than a conventional gasoline vehicle (saving them more than 68% on fuel cost*), Hawai‘i residents save only 5 cents per gallon on gasoline (less than 1.5%). That explains why the first goal (saving consumers on fuel costs) is harder to achieve in Hawai‘i.

Second, while less than 1% of US electricity is generated from oil, Hawai‘i currently generates 75% of its electricity from oil. This explains why the second goal (reducing dependency on oil) is harder to achieve through EVs in Hawai‘i.

Finally, an often-quoted goal of increased EV penetration is to lower greenhouse gas (GHG) emissions from the transportation sector—as the largest and fastest growing component of state GHG emissions. Achieving that goal is also currently easier in the rest of the nation where more than 40% of electricity comes from cleaner sources than oil and coal (i.e. renewables, nuclear, and natural gas).

Therefore, both of the objectives mentioned by the US Energy Secretary are harder to achieve in Hawai‘i, unless consumers charge their vehicles themselves, for example using their own rooftop PV systems. That way, they could save more on vehicle fuel costs and help the State reduce their reliance on oil.

 

---Iman Nasseri and Kimberly Burnett 

 

*It is worth mentioning that both this website and much of the media tend to examine “pump prices” for passenger cars. Although EVs show a lot of promise in much of the US in terms of fuel cost per miles compared with gasoline and other alternative-fueled vehicles, considering the higher capital cost of EVs than their similar class conventional gasoline vehicles (Please refer to section 2.8 of Transitions to Alternative Vehicles and Fuels), they may not look as promising in terms of overall cost per mile.


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