Unemployment Rates

Optimistic forecast for Hawaii’s economic recovery, but some risks remain

(BIVN) – The University of Hawaii indicates that an optimistic economic recovery is expected, with the end of the wave of COVID-19 Omicron variants and the expected return of international visitors.

On Sunday, the University of Hawaii’s Economic Research Organization, or UHERO, said it forecast a broader economic recovery in its first-quarter forecast for 2022. However, risks remain due to the Russian conflict. -Ukrainian, federal interest rates and other possible pandemics. – related disturbances.

“Well, it’s a more optimistic outlook, it’s a bit more optimistic,” UHERO executive director Carl Bonham said in a video press release. “We got through Omicron very quickly and we’re starting to see visitor numbers coming back.”

UHERO said the “expected transition of the virus to endemic disease paves the way for the easing of travel restrictions and the long-awaited return of international visitors.”

Carl Bonham, Executive Director of UHERO. (from video courtesy of University of Hawaii)

“We’ve seen Canadians back to 40% of their pre-pandemic level,” Bonham said. “The Japanese market, we’ve seen some easing of restrictions but not a full easing, so we really think it’s going to be the golden week until summer before we really see a marked improvement in Japanese visitor numbers.”

The University provided these highlights from the March 6 report:

  • The Omicron wave of the COVID-19 pandemic has dealt a blow to global growth. The rapid receding of this wave and its likely evolution to endemic status is good news. Still, the ongoing struggles with the virus, the weight of fiscal restraint, and continued supply and price pressures have dampened the outlook for 2022. Russia’s invasion of Ukraine and resulting international sanctions add new uncertainty to the US and global outlook.
  • The recovery of the Hawaii visitor industry was interrupted by the Delta variant wave of the COVID-19 pandemic in the summer of 2021, and the Omicron variant caused another setback at the end of the year. Bookings from US visitors have now returned to pre-pandemic pace, although bookings from Asian visitors remain essentially zero. Although the recent outbreak of COVID-19 in some Asian countries is causing concern, UHERO expects travel restrictions to ease in the coming months, allowing a significant return of international visitors.
  • The pandemic has had unusual effects on labor markets, including record rates of business creation and increased worker absences. Hawaiʻi’s employment recovery, which was proceeding at a healthy pace, came to a halt after the hit of the Delta wave. Employment gains will resume this year, although a reduced labor force and lagging tourism will delay a full recovery.
  • Home prices in Hawaii jumped 18% last year, roughly in line with the United States as a whole. Rising prices and rising mortgage rates will further reduce housing affordability on the islands. Initiatives to improve affordability are underway at national and local levels.
  • Robust construction activity continues. Federal spending on Hawaii’s share of a massive $8 billion Navy contract and the Infrastructure Investment and Jobs Act will sustain the industry for years to come. The possibility of a moratorium on new water meters due to the Red Hill water crisis is a concern for new residential developments.
  • After a weak start to the year, arrivals will surpass last summer’s peak in the second quarter and reach 90% of their pre-pandemic level by the end of the year. The number of visitors will reach 9.5 million in 2023.
  • The state payroll will see increasing gains as the year progresses and will rise 4.5% for the year as a whole. By 2023, job growth will have absorbed most of the labor market slowdown, bringing the unemployment rate down to 3.3%.
  • Income growth in Hawaiʻi, which has been buoyed by broad federal stimulus, will be hit this year with the end of direct support for families. Real personal income will fall by 4.7% this year. The growth in employment and wages will help initiate a recovery in incomes during the year.

UHERO says big risks remain. “COVID-19 still has the capacity to be very disruptive,” the UH press release said. “Federal Reserve interest rate hikes could cause a bigger slowdown than desired. Russia’s invasion of Ukraine could lead to higher energy costs and slower global growth, which which would impact Hawaiian tourism and local inflation.

“We’re going to see more inflation,” Bonham said. “We’re going to see higher gasoline prices, possibly higher electricity prices. So if you add the effects of higher oil prices for the next 3-6 months, you get another 25-50 basis point increase in inflation.