UHERO County Forecast:
County Economies Steadily Slowing

June 8, 2007

Carl Bonham, Byron Gangnes, and Leroy Laney

University of Hawai'i Economic Research Organization

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EXECUTIVE SUMMARY

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The overall outlook for Hawai'i's county economies is for continued slowing along a path that has been evident since at least the middle of 2005. The pace of slowing will vary, depending on relative stage in the construction cycle, health of each county's tourism market, and other factors. By 2008, it is expected that each of the four counties will have slowed to a pace that is broadly consistent with sustainable trend growth.

  • Economic conditions continued to soften gradually across the state in 2006. Visitor arrivals were flat overall, although the neighbor islands continue to grow visitors at a healthy pace. The housing boom came to an end statewide, with declining prices after mid-year. Job growth slowed on all islands, receding from the 2.6-4.1% pace of 2005 to the 2.2-3.6% range. Real income took a hammering from high inflation, falling from an average of 2.9% in 2005 to 0.4% last year, according to UHERO estimates.

  • Kaua'i and Hawai'i counties will see the strongest visitor growth this year, but off a bit from last year's strong performance. Visitors to O'ahu will fall by a fraction of a percent, because of continuing weakness in the Japanese market. Maui will post just 1.3% growth, in part because of hotel rooms that are out for renovation. The trend toward slower visitor growth will continue on each of the neighbor island economies in 2008.

  • Additional labor market cooling will occur in each county this year. The sharpest deceleration will be seen on the Big Island, although the county will still lead that pack with 2.3% growth. Honolulu job growth will slow to 1.9% this year, and Maui jobs will grow by 1.7%. Kaua'i, which saw the weakest growth in 2006, will match that 2.2% pace this year. By 2008, payroll job growth will slow to the 1.5-1.7% in each of the neighbor island economies. O'ahu will see job growth slow to 1.2% in 2008.

  • Cyclical slowing in construction will proceed on all islands, but not at a uniform pace. On O'ahu and the Big Island, the construction job base will slow significantly this year and become slightly negative in 2008. On Maui, strong 2006 permitting activity suggests expansion will continue longer. On Kaua'i, moderate job gains are expected to continue through 2009, based both on strong recent permitting activity and the significant number of visitor industry construction projects in the pipeline.

  • Even with this cooling, construction will continue to be among the strongest sectors this year. Other areas of strong growth will be transportation and utilities and the "other services" category, which includes business, administrative, and professional service. The wholesale and retail trade sector will be rather soft on O'ahu and Maui. Accommodation and food growth will be strongest on Kaua'i and weakest on Maui. There will be significant declines in agriculture on all islands except the the Big Island; the biggest drop will occur on O'ahu, as a result of the Del Monte phase out.

  • We expect statewide real income to grow 1.4% this year and recover to 1.8-2% growth in 2008-2009. Honolulu County will be just under the statewide figure, with 1.2% growth this year, recovering to 1.7% in 2008. Hawai'i County, which has maintained the fastest job growth, is expected to see nearly 3% real income growth this year. Income growth on Kaua'i will rebound to 2.1% in 2007. Maui will see only 1.4% real income growth this year. Further recovery in real income is expected for all four counties as recent inflation begins to be reflected in market wages.

 

Major Economic Indicators, Year-Over-Year % Change

 

2004

2005

2006

2007

2008

2009

 
                 
 

Statewide

    

Visitor Arrivals

8.3

7.3

0.0

-0.2

1.6

1.6

 

    Japan Visitor Arrivals

10.6

2.4

-9.3

-3.6

1.1

1.1

 

    U.S. Visitor Arrivals

7.3

8.5

2.3

0.9

1.2

1.4

 

Payroll Jobs

2.8

3.1

2.5

1.9

1.4

1.2

 

Real Personal Income

5.2

2.9

0.4

1.4

2.0

1.8

 
             
 

Honolulu

    

Visitor Arrivals

9.1

6.0

-2.5

-0.7

1.7

1.3

 

    Japan Visitor Arrivals

11.1

2.7

-10.0

-4.4

1.9

1.2

 

    U.S. Visitor Arrivals

7.3

7.2

0.8

2.0

0.6

0.7

 

Payroll Jobs

2.4

3.0

2.4

1.9

1.2

0.9

 

Real Personal Income

4.8

2.6

0.1

1.2

1.7

1.5

 
             
 

Hawai'i

    

Visitor Arrivals

6.1

18.8

4.8

4.1

2.7

1.4

 

    Japan Visitor Arrivals

11.0

13.7

-6.1

-7.0

-0.4

1.3

 

    U.S. Visitor Arrivals

6.4

18.7

7.5

4.9

3.8

1.4

 

Payroll Jobs

4.0

4.1

3.6

2.3

1.6

2.0

 

Real Personal Income

6.7

4.0

2.2

2.8

3.5

2.9

 
             
 

Maui

    

Visitor Arrivals

0.5

6.3

4.7

1.3

1.1

2.0

 

    Japan Visitor Arrivals

-11.1

-12.5

-9.4

-12.3

-3.7

1.4

 

    U.S. Visitor Arrivals

1.3

7.3

3.9

1.0

1.2

1.9

 

Payroll Jobs

3.9

3.2

2.4

1.7

1.5

1.6

 

Real Personal Income

6.3

3.6

0.7

1.4

2.0

2.2

 
             
 

Kaua'i

    

Visitor Arrivals

4.6

6.8

8.4

5.2

2.7

3.0

 

    Japan Visitor Arrivals

6.2

-20.4

-15.0

-8.4

-4.5

0.4

 

    U.S. Visitor Arrivals

4.6

8.5

8.8

5.1

2.6

2.8

 

Payroll Jobs

3.7

2.6

2.2

2.2

1.7

1.8

 

Real Personal Income

6.7

3.1

0.5

2.1

2.3

2.5

 

*Source is UHERO. Figures for 2007-2009 are forecasts. Figures for 2006 income are UHERO estimates. Full macro and industry detail are available to subscribers and sponsors.

Copyright © 2007 UHERO. All Rights Reserved.  

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