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UHERO State Forecast Update: Hawaii's Two-Speed Recovery

Recovery edges forward in the Islands, for now primarily in tourism and mostly on Oahu. But the very rapid tourism rebound will begin to spill over to the rest of the economy in 2011. Hawaii's economy continues to recover, but in  very uneven fashion. Tourism is providing ongoing positive surprises with recent months rivaling the level of activity prior to the Aloha and ATA failures. 

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Global Economic Forecast: World Recovery Falters

Global economic recovery is proceeding, but in an uneven fashion. The developing Asian countries that were the first to show signs of life last year continue to expand at a healthy pace, driven by rebounding trade but also by strong domestic demand. Growth in the developed world remains decidedly subpar and insufficient to bring about a timely reduction in unemployment. With the pace of U.S. growth weakening in recent months and fiscal stimulus winding down, prospects are for slower growth in much of the world in 2011. True to form, recovery from the recent financial crisis is shaping up to be a long slog.

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UHERO State Forecast Update: Strong Summer for Tourism

Hawaii's recovery continues, led by a better-than-expected performance from tourism. The visitor industry's summer strength is sustaining moderate job gains in related sectors. Much of the rest of the state economy remains relatively weak, and we continue to see net job losses in some areas. The cooling of growth in the U.S. and overseas markets will be a challenge for tourism over the next year. We expect continued Hawaii expansion, but at a restrained pace through 2011.

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Construction Forecast: Construction Begins to Stabilize

Hawaii's construction industry continues to seek a bottom to what has been a bruising downturn. Recent months have brought some encouraging news, with permitting numbers beginning to stabilize and employment losses tapering off. The home resale market appears healthier, although this can be explained in part by the now-expired Federal tax credits. At the same time, non-resedential permitting remains very weak and focused on just a small number of large projects. Until private demand picks up, the industry will find its most promising support in public sector projects, which are expected to ramp up further in coming months.

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County Economic Forecast:
Counties Begin Recovery After Record Downturn

Recovery will take hold across Hawai'i's four counties during 2010.  Visitor numbers have stabilized and will gradually improve as growth strengthens in major tourism markets.  After record-setting job losses, limited net hiring will begin this year, building as we move into 2011 and 2012.  Private construction is bottoming out, and the sector will begin to see more benefit from Federal and State spending programs.  While growth is resuming, the pace of recovery will be slow, and it will take a number of years to return to relative economic health.  The challenge is greatest on the Neighbor Islands, which have suffered a much deeper downturn than O'ahu over the past two years.

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Annual Hawaii Economic Forecast:
Hawai'i Recovery Takes Hold

Hawai'i's economic recovery has begun. Employment is stabilizing, and many sectors will begin to add modest numbers of jobs as the year progresses. Visitor arrivals and spending will continue to firm along with economic conditions in our major tourism markets. Private construction is bottoming out, and the sector will begin to see more benefit from Federal and State spending programs. While growth is resuming, the pace of recovery will be slow, constrained by tepid U.S. consumer spending and the drag from the State and local fiscal conditions. As a result, unemployment will recede only gradually from current high levels.

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Hawaii Economic Forecast Update:
Weak Growth Expected in New Year

Prospects are good for an early-2010 return to growth in Hawai'i. Recent data suggest we are past the trough of the visitor industry downturn, and gradual improvement will occur as the global recovery takes hold. The construction cycle is expected to bottom out late next year. After steep losses, most industries will begin to start adding jobs early in the new year. The pace of recovery will be modest, because of lingering weakness in the U.S. and Japan and the disastrous State budget picture.

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Global Economic Forecast:
Asia Leads World Recovery

After a deep, synchronized recession, growth is resuming across a broad swath of the global economy. Leading the rebound are the dynamic Asian economies. These countries, which were hit hard by last year's collapse of world trade, have now seen a return to export-led growth, much of it originating from demand within the region. Growth has also returned to the U.S. and Japan, but the depth of the decline, lost household wealth, and lingering credit problems mean that full recovery will take a number of years.

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Hawaii Economic Forecast Update:
Recovery Still Around the Corner

Things are looking up for the U.S. and global economies. Japan returned to growth in the second quarter, and it appears likely that the US will post positive growth for the current quarter. It is harder to find evidence of a turnaround in the Hawai'i economy, although we expect recovery to begin by early next year. A technical recovery will not mean a rapid return to economic health. Because of anticipated weak US and Japanese consumer spending and the drag from continuing State fiscal problems, the local economy will take a number of years to fully recover.

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Hawaii Construction Forecast:
No Bottom Yet to Construction Downturn

The U.S. recession is easing, but prospects for a quick Hawai'i construction recovery remain poor. At the national level, expansion is just now getting underway. We expect U.S. output to grow by more than 2% during the current quarter, but job losses will continue into the first part of 2010. And, while overall credit conditions have improved, commercial lending is still being affected by the weak economic outlook and the hangover from past excesses. For Hawai'i, this means that commercial and resort development will continue to suffer for some time. The downturn in residential permitting has actually deepened, and we will not see any marked improvement until home prices bottom out in 2011.

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Hawaii Economic Forecast:
State Budget Crisis Threatens Recovery

Two recent developments have caused us to mark down a bit our already weak outlook for the Hawai‘i economy. The H1N1 flu epidemic has worsened prospects for Japanese tourism, which will lead to somewhat larger visitor losses this year. But the bigger concern is fallout from the State fiscal crisis. Government actions to address the growing revenue shortfall will further depress jobs and especially income this year and next, with the risk that recovery could be further delayed.

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County Economic Forecast:
Neighbor Islands Bear Brunt of Recession

Hawai‘i’s counties face the most challenging economic environment in many years. The severe U.S. and global recessions will last through much of 2009, and when recovery does begin it is likely to be anemic by historical standards. This means a long and deep downturn for the Hawai‘i visitor industry. Construction activity will continue to decline for the next several years, acting as a further drag on the economy. The downturns in tourism and construction are most severe on the Neighbor Islands, and so these counties will suffer a more severe recession than O‘ahu. Government stimulus will help to support growth, but it will not be sufficient to avoid a long and painful contraction. The spread of the A/H1N1 virus poses a risk that is impossible to quantify at this time.

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Hawaii Economic Forecast:
After Sharp Drop, Recovery Will Take Time

The next several years will be difficult ones for Hawai‘i businesses and households. The visitor industry will languish, as the deepest global recession in decades continues to undermine travel demand. Local construction activity will weaken further, because of the unwinding residential cycle, a poor business outlook and persistent problems in national credit markets. Like their counterparts on the mainland, Hawai‘i residents have become more cautious in their spending, which is contributing to local economic weakness. Deteriorating labor market conditions over the next two years will prevent a quick rebound of their purchasing power and confidence. Add in a looming state government fiscal crisis, and the result will be a long and deep Hawai‘i recession.

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Hawaii Construction Forecast Update:
Global Downturn Hammers Construction

The global credit crisis and deepening recession have materially worsened prospects for the Hawai‘i construction industry. Commercial and resort building are in retreat, hampered by a bleak national outlook and financing constraints. The residential construction downturn will continue as income and wealth losses undermine housing demand. We now expect a deeper ajustment in the local real estate market, although somewhat milder than past Hawai‘i experience and much less severe than the steep contractions in some mainland regions. Government spending initiatives may provide substantial support for the industry in the medium term, but they will provide very little stimulus over the next two years.

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Hawaii Economic Forecast Update:
No Quick Recovery from Hawai‘i Recession

The global financial crisis and widening global downturn have materially worsened prospects for the Hawai‘i economy. Economic conditions are now poor in virtually every visitor market, and as a result we expect the current sharp tourism downturn to continue well into next year, with no significant recovery until 2010. Moderate contraction of the construction industry and the developing state fiscal crunch will also weigh on the local economy. The Hawai‘i economy is now in recession, and as the downturn continues into 2009 we will see larger job and income losses than we have experienced to date.

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