Talk about the economy turned to action yesterday, as Hawai‘i’s two largest banks took a cue from the Federal Reserve’s emergency interest rate cut by lowering their own base lending rates. First Hawaiian Bank reduced its base rate from 7.5
Talk about the economy turned to action yesterday, as Hawai‘i’s two largest banks took a cue from the Federal Reserve’s emergency interest rate cut by lowering their own base lending rates.
First Hawaiian Bank reduced its base rate from 7.5 percent to 7.25 percent, effective yesterday. Bank of Hawaii said it would do the same beginning today.
The news bolstered Hawai‘i banks’ stocks, which ended the day with gains. Bank of Hawaii was up 4 percent and Central Pacific Bank’s parent company, Central Pacific Financial Corp., ended the day up 7 percent. Likewise, the Fed’s move turned around the market’s otherwise downward plunge, providing a brief respite from months of bad news.
The cuts were not, however, considered a solution to the economic symptoms of a nation approaching recession.
Beth Tokioka, director of the county’s Office of Economic Development, said the traditional approach of lowering rates to stimulate spending might not have the desired effect here. Home prices are still “relatively high,” meaning interest rates are not the only obstacle faced by potential homebuyers.
“It probably can’t hurt, but it may not be the tipping factor,” Tokioka said.
Local indicators
Looking to the local indicators of economic health, Tokioka said that visitor arrivals appear to be down.
“Anecdotally, hoteliers are reporting that the first quarter of 2008 looks fairly soft,” she said. Tokioka cautioned that the booking window has narrowed considerably in recent years, making it difficult to look too far into the future. In addition, the forecast for arrivals last year was expected to be down, but numbers held instead on Kaua‘i in 2007.
Tokioka said an upward trending unemployment rate, another important local economic indicator, may not be a bad thing for Hawai‘i. The statewide increase is to 3.2 percent for December from 2.9 percent the previous month, compared to the national average of 5 percent last month.
“For the past year it has been low, low, low,” she said, which is indicative of a worker shortage.
Should the economy continue sliding toward recession, visitor counts will likely decrease; however, Kaua‘i has two factors that help insulate it from the effects.
Timeshares, which are less likely than hotel occupancy to fluctuate in tight economic times, account for about a quarter of the island’s occupancy rates, compared to 8 percent statewide. Tokioka said Kaua‘i also sees a smaller percentage of international visitor arrivals, which tend to respond to global economic news.
Governor talks long-term in State of State
Looking past the immediate economic concerns to the long-term, Gov. Linda Lingle, in her State of the State address yesterday, stressed the timeliness of a concerted shift away from a land development-based economy.
“I am convinced that Hawai‘i’s recent strong economy has allowed us to postpone making difficult but important decisions and has perpetuated education and workforce structures that do not fit well in the 21st century,” Lingle said.
She pointed to alternative programs that emphasize technology and arts and culture education, including the establishment of science, technology, engineering and math academies in middle and high schools. Lingle also talked about the national FIRST Robotics program, which will host one of its regional competitions in Hawai‘i later this year.
Tokioka said the county has been working toward that initiative for about five years, though the investment is not expected to yield immediate results. In terms of strengthening the local tech industry, which has a concentration of jobs at the Pacific Missile Range Facility, Tokioka said the supply of trained workers has not caught up with demand.
• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com.
