Little more than six months after the outbreak of the war in Iraq, economic growth in Hawai‘i continues unabated. While the tourism industry is not wholly recovered, it has shown surprising resilience. And, buoyed by strong construction and housing, the
Little more than six months after the outbreak of the war in Iraq, economic growth in Hawai‘i continues unabated. While the tourism industry is not wholly recovered, it has shown surprising resilience.
And, buoyed by strong construction and housing, the broader economy has moved to new record-high job counts and levels of personal income.
With permitting activity high and major military housing projects soon to get under way, construction will continue to grow in the coming year. Com-bined with gains in tourism, this will support heal-thy expansion for the Hawaii economy.
Recent Developments
After tourism setbacks associated with the lead-up to war, the economy has been on a steady ex-pansion path.
While interest rates have begun to edge up, they are still at low levels that support a a hot housing market and associated construction. Job creation is occurring across the economy, with only a few sectors (transportation, telecomm, manufacturing, accommodations) still below pre-9/11 levels. Real (inflation-adjusted) personal income expanded at an estimated 3.5 percent rate in the first half of the year.
There is a palpable sense of optimism among households and businesses alike. Notable developments over the past year include:
The number of payroll jobs rose by a robust 2.4 percent in the year through September, compared with the same period in 2002. The job count reached an all-time high of 570,000 in July on a seasonally-adjusted basis and has remained at that level. Job recovery is broad based, with virtually all sectors seeing gains. The unemployment rate remains low, although it has edged up above 4 percent in recent months because of pro-cyclical labor force growth.
Among sectors showing the strongest job gains over the past year were construction, which re-ported 4.9 percent more jobs in September than a year earlier, education and health care (up 3.8 financial services (up 2.2 percent).
Leisure and hospitality jobs were up 2.9 percent in September, and are nearly back to the levels seen prior to 9/11. Information and telecommunications jobs continue to suffer here as on the mainland because of the lingering cyclical downturn in those areas. State government payrolls are stable at last year’s levels, while federal government employment has risen more than 2 percent.
Visitor arrivals for the year through September slipped 1 percent from year-earlier levels.
Moderate growth in U.S. visitors, up 2.6 percent over 2002, failed to make up for a 13.4 percent drop in Japanese visitors.
Monthly visitor arrivals from Japan improved quite a bit over the summer, and were down only 9 percent in the third quarter.
Neighbor island markets, which are less dependent on Japanese visitors, have fared better than O‘ahu. Arrivals were down 6 percent on O‘ahu through September, but were up more than 4 percent on Mau‘i. Despite the slight drop in visitor arrivals, an increase of about 1/2 day in the typical length of stay has raised the number of visitor days nearly 4 percent from year-earlier levels. Visitor days are running at nearly the same high level we saw back in 2000.
After a decade of abysmal performance, Hawai‘i real personal income has expanded at a 2 percent or better rate for all years but one since 1997.
Last year, real income posted an impressive 3.8 percent gain, and it has risen about 3.5 percent in the first half of this year.
Bolstered by low interest rates and a strong hous-ing cycle, the construction sector saw more than 9 percent growth in real income in the first half of the year; real estate, rental and leasing income was up 10 percent.
Among other sectors seeing strong in-come growth were retail and wholesale trade (up 5.5 percent), transportation and warehousing (up 5.9 percent), professional and technical services (up 5.4 percent), and health care (up 4.6 percent). Income earned by Federal government employees rose more than 9 percent from the first half of 2002.
• The housing market remains strong, reflecting both low interest rates and recent gains in house-hold income. Sales of existing O‘ahu single family homes hit 454 in July, and have been running about 25% ahead of last year.
Condo resales were up 28 percent in the third quarter. Prices of single family homes were 13 percent higher in the third quarter, and condo prices were 15 percent higher. This brings home prices back up in record territory, although Honolulu condo prices are still a bit below 1990 levels.
