LIHU‘E —Two Hawai‘i economists were optimistic for Kaua‘i’s slow but steady growth, and see recovery in most sectors with more immediate progress in tourism. The economists provided an overview of local and national trends at the Kaua‘i Chamber of Commerce’s
LIHU‘E —Two Hawai‘i economists were optimistic for Kaua‘i’s slow but steady growth, and see recovery in most sectors with more immediate progress in tourism.
The economists provided an overview of local and national trends at the Kaua‘i Chamber of Commerce’s Third Quarter Membership Meeting Thursday at the Kaua‘i Marriott Resort and Beach Club. The event was sponsored by First Hawaiian Bank.
“The tourism recovery has not spread as quickly as we thought it would to the other sectors of the economy,” said Leroy O. Laney, a professor of economics and finance at Hawai‘i Pacific University, who spoke on the results of his annual community survey of Kaua‘i economic trends. “It has been very slow,” he added.
For a small-island economy, the measurements tend to be erratic from month to month, but the trend clearly shows healthy growth, Laney said. This is due in part to more direct flights from the Mainland and a rise in hotel renovations and visitor spending, according to Laney’s survey of Kaua‘i businesses.
“Hotel occupancies are extremely strong,” Laney said. “The tourism plant is in solid shape, thanks to recent renovations of several hotel properties.”
Kaua‘i is better than the other islands at capitalizing on its movie industry presence, he said. The Kaua‘i Visitors Bureau reports a surge in visitors who come to visit scenes of their favorite films that were shot here.
“An ATV tour now operates to scenes from (“The Descendants”) and the film put a place like Tahiti Nui in Hanalei on the map,” Laney said. “Movies are a big thing for Kaua‘i, and several others are in the pipeline for the future.”
Other positive growth areas are real estate sales and the seed corn industry, he said. Residential real estate sales are picking up with record low mortgage rates and falling prices to help affordability, albeit some of the sales are foreclosures, he said.
“Activity in commercial real estate has been picking up,” he said. “Median single-family home prices on Kaua‘i continue to fall, though at a somewhat decreasing rate.”
Job growth continues to lag with Kaua‘i currently 8 percent below the 2007 peak employment rate. He said unemployment levels are moving down slowly, but not fast enough for people to notice the difference.
Island construction jobs are about 35 percent below 2007, but with major projects in the works. The peak measurement may be an inflated high in a volatile industry, he said, but any way you look at it, the industry is years away from a full recovery.
“Residential real estate prices are still dropping and the job count still has a way to go to recoup losses from the recent recession,” said Laney.
Looming construction projects include the proposed Kilauea Lighthouse Village, a 47,000-square-foot shopping mall across from Kong Lung Center in Kilauea.
Two photovoltaic facilities are under way at Port Allen on Alexander & Baldwin land, and another in Koloa sponsored by Grove Farm partnering with Solar City.
Safeway also is still expected to move ahead with its shopping center at Hokulei Village.
Grove Farm reports increased activity in its Pikake subdivision. It is pushing through permitting issues for the Lihu‘e-Hanama‘ulu Master Plan project to build a 50-unit Waihohonu Project in Koloa.
ABC Stores bought Coconut Marketplace and improvements might be planned.
Government projects include the Lihu‘e mill bridge, and the U.S. Navy Missile Range at Barking Sands is about to begin preparing a new land-based launch facility for the Aegis Ashore system.
There is vacant space in the Waimea Tech Center that was built for contractors of the last PMRF project, he said. The infrastructure work for this new system is imminent, and would require local concrete and contractors to assemble component parts.
“This alone will likely be a big boost for construction on Kauai,” Laney said.
The agriculture sector notes the expansion of the seed corn industry on the Westside. With the exit of Monsanto, BASF, Syngenta, Pioneer and Dow Agrosciences remain.
The North Shore taro crops are plagued by bird damage, Laney said. A 75-acre agricultural park in Kilauea is threatened because of endangered birds at the nearby federal wildlife refuge.
National, international news
The national and international presentation was provided by Jack Suyderhoud, a professor of business economics at the University of Hawai‘i at Manoa’s Schidler College of Business.
The bottom line on the U.S. economy is that we are sputtering along on a positive line and we don’t expect a recession next year unless the federal government somehow pushes the economy over a fiscal cliff, he said. Clarity should come when things settle down after the election and people begin making rational decisions on how to deal with the deficit and budget, he said.
“The speed that which we are moving along is not particularly robust,” Suyderhoud said. “It’s 2 to 3 percent growth, which at best will not make unemployment worse but its not going to significantly improve on (what is now around 8 percent) unemployment.”
One banquet guest asked if we could realistically balance the U.S. budget, and would doing so help or hurt the economy in the short term?
Suyderhoud said the budget would not be balanced any time soon, but steps to address it would involve politically challenging entitlement reforms. He said fears about approaching a fiscal cliff should lead to attempts to balance the budget quickly.
“That could drive us into recession because of higher taxes and spending cuts, such as was experienced by the U.K.,” he said. “I don’t think that it is in our interest to do that in particular, but at some point we are going to have to come to grips with the long-term imbalances and entitlements.”
Another guest asked how the rising cost of food and fuel will impact personal income and recovery in the recession.
Laney said to subtract inflation when measuring real personal income. The Core Deposit Intangible banking scale does not include food and energy as they are considered volatile components that are influenced by one-time events such as war or drought, he said.
“Inflation is not the major concern and hasn’t been since onset of the recession,” Laney said.
Another guest asked, why do economists and politicians refer to U.S. debt as a percentage of GDP, as opposed to a ratio of income or revenues that might better reflect an ability to pay off debt?
Suyderhoud said GDP is a measure of national income and is a broad equivalent to gross national income, and so is effectively compared to income. It is a denominator to measure national performance across time and with international comparisons, he said.
“GDP is usually the denominator in this sort of thing because it allows us to sort of measure the trend in these variables, while adjusting for the size of the economy and for our ability to repay debts and debt service costs,” he said.
Another guest said Kaua‘i is reportedly ranked 50th as the worst place to do business around the country. He wanted to know what would an economist suggest to improve performance in these annual ratings with regard to policies and business environment?
Lane said that is a common question because Kaua‘i consistently shows up on these lists for several reasons that have been discussed for years.
Small businesses are plagued by a relatively high tax environment and the cost of doing business here is high, Laney said. More importantly, he said small businesses are more vulnerable than large businesses regarding tax burdens and employee benefits.
Some of it can’t be helped with the unique nature of the Hawaiian economy, but it does not help when large business and organized labor have the ear of government, he said. The regulations for small start-ups are prohibitive with land-use, employee expenses and workers compensation, along with general excise taxes coming out of their gross revenues, he said.
“One problem is that, as a political matter, the recipients of benefits form a more cohesive lobby than the people that are affected negatively by them, and especially in hard times,” Laney said.
A guest asked how the current crisis in Europe is affecting Hawai‘i’s economy.
Suyderhoud said the euro zone is struggling to stay together in a recession. Exports to Europe have declined from the Americas and Asia, and as trade slows down that affects everyone, including customers and tourists of Hawai‘i.
“The second problem is that it has an impact on value of the euro itself, which has decreased significantly since the onset of the debt crisis in Europe,” he said. “This makes our products more expensive and more difficult to compete against European companies in global markets. Financial variability and risk spreads across oceans due to uncertainties in the European markets.”
The last question of the evening was about renewable energy in Hawai‘i and if it could improve the overall state economy.
Laney said Hawai‘i has more renewable sources of energy than most anywhere else, with great strides in the photovoltaic industry and the potential for geothermal, wind and wave technologies. The irony, he said, is that the islands are still increasingly dependent on fossil fuels.
“It will definitely help the economy to convert,” Laney said. “It will be cleaner and better for the environment, and we won’t be sending our money abroad.”
• Tom LaVenture, staff writer, can be reached at 245-3681 (ext. 224) or by emailing tlaventure@thegardenisland.com.
